Michael Burry Says This Is The Top — Is It?

Ed Elson is joined by Steve Eisman to unpack why stocks are at record highs and what it would take for him to call a market top. Then, Ryan Petersen returns to explain how the war with Iran and escalating tariffs are reshaping global supply chains. Finally, Ed breaks down the growing evidence that the AI boom has become increasingly dependent on OpenAI. Steve Eisman is the Host of the Real Eisman Playbook. Ryan Petersen is the CEO and Founder of Flexport. Subscribe to the Prof G Markets Youtube Channel Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 1:41Ed Elson?

  Welcome to Prof G Markets. I'm Ed Elson. It is August 6th. Let's check in on yesterday's market vitals. The major indices were mixed after a series of highs. More on that in a second. Brent crude was relatively stable. Treasury yields were flat. And finally, Google shares fell nearly 4% on news that DeepMind's chief scientist is leaving and its CEO, Demis Hassabis, is stepping aside.

• 2:08Ed Elson?

  Okay, what's happening? The S and P 500 just hit another record. The fresh intraday high yesterday followed Tuesday's performance in which the index rose nearly 2% to its first record close since June. The Nasdaq also gained nearly 3% that day and the Dow crossed 54,000 for the first time. Across the markets, it seems as though investors have shaken off the AI anxieties that have defined much of the past month. But someone isn't buying it, and that is Michael Burry. In a note on Tuesday, the investor who called the 2008 crash said he's sticking with his bets against Nvidia and Micron and Tesla and Palantir and the semiconductor index. He said, quote, "I continue to believe it is possible

• 2:51Ed Elson?

  we are near a major top," adding that we could see, quote, "a 1987 type four." Now investors are left wondering who's right? The Bears or the Bulls? Here to discuss, we're speaking with Steve Eisman, the legendary Big Short investor and host of The Real Eisman Playbook. Steve, thank you for joining us on Prof G Markets. You are one of the other guys who called the 2008 crash, one of the other guys in that movie.

• 3:18Speaker 07

  It'll be on our tombstone. There's no question about it.

• 3:21Ed Elson?

  Exactly. I mean, what do you make of this market right now? Because I thought we were all worried about AI, worried about the debt, worried about the reliance on a handful of AI labs. But we're sitting at record highs. So what is the market actually telling us right now?

• 3:39Speaker 07

  Number one, the US economy is very strong. You know, all the banks reported mid-month in July and the credit statistics were as benign as they possibly could be. So there's no credit issues in the US economy overall. It's a strong M and A cycle. The IPO calendar is not bad. And there's no question there's still a K-shaped economy. But you know, if you look at the numbers of Visa and Mastercard, the overall payment volumes are quite robust. Where you do see things like the K-shaped economy would be like in a company like Procter and Gamble, who has no revenue growth. But that's not what's driving the economy. Right now, you know, things are fine.

• 4:23Speaker 07

  There's no, there's no one, you know, despite all the hysteria about AI is going to destroy every single job on planet Earth, the employment numbers are still very, very strong. I think that's why the market keeps going higher, because things are just okay. Now,

• 4:43Speaker 07

  I do think that the AI story has gotten a lot more complicated. You know, if we, if you and I were sitting here a year ago, you'd be hard pressed to find anyone who had anything negative to say. You know, maybe someone like Gary Marcus, who has been on my show, but he's probably been on your show as well. I love Gary. You know, Gary, Gary has a lot to say and it's all, it's all great. But Gary was like the lone, you know, July of last year. Gary Marcus was like the only person on planet Earth who had anything negative to say about AI. You know, you have Ed Zitron as well. But you know, if you compare this to 08. So Michael and I both had the same thesis, which was

• 5:28Speaker 07

  underwriting, mortgage underwriting standards have deteriorated dramatically. And then what was good about the thesis was every single month, securitization data came out showing credit quality of hundreds of, and billions upon billions of mortgages. And so you could see, you could actually see the deterioration every single month. You had, you had a data set that was incredibly robust, that came out every single month and said to you, you're right. So, so you had this reinforcement. You know, if you're going to construct a negative AI story,

• 6:08Speaker 07

  well, you don't have a securitization database that's going to help you. So what, what's your, what's, what's the negative stories? So let me tell you what I think is potentially the negative story, but it's not here yet. So

• 6:22Speaker 07

  what's made the AI story more complicated is the following. Number one, there's no question that the business is much more capital intensive than anybody possibly could have imagined. So you know, companies like Microsoft and Google and Amazon, you know, companies who once threw off cash like it was water

• 6:46Speaker 07

  have negative cash flow. So that's, that's a big change. Now, that doesn't mean that the, that, you know, these companies are on the verge of anything bad. It just means that the dynamics of their business has really shifted. They're investing massively. Whether they'll get great returns, we don't know yet. But that's one big change. And I think the other major change is that the LLM Agentic AI business, which is really Anthropic and OpenAI, and really just a few other people, doesn't seem to have any moats around it.

• 7:23Speaker 07

  Because you know, people switch from models to models. And that, and now you have the, the open end models from China, which are much cheaper and people seem to be switching to. And so maybe there'll be a price war, maybe not. Where I think the, the chink in the armor potentially is,

• 7:44Speaker 07

  I read this report that basically said something like 70% of Amazon and Google's and Microsoft's AI capex businesses are from OpenAI and Anthropic.

• 8:02Speaker 07

  So if, this, this, this is what I'm looking for. If a massive price war broke out because of the Chinese models and OpenAI and Anthropic got in big trouble,

• 8:18Speaker 07

  that would unwind a lot of the, of the AI trade. Because then OpenAI and Anthropic would not be able to spend as much, which would mean that fewer chips would be bought. I mean, you could figure out the rest. But until that happens, you know, these companies are, keep spending money like it's water. So, you know, Nvidia is going to report on, I think, August 26. I mean, it has to have a good quarter. I couldn't, how could it not have a good quarter? When Amazon is spending $225 billion this year on capex. So until we see real weakness, I think, out of OpenAI and Anthropic, I'm not on Burry's side.

• 9:02Ed Elson?

  Well, this is very interesting because, as you mentioned, we're seeing more numbers on the reliance on OpenAI and Anthropic, at least among the big tech companies. Just today, Bloomberg reporting in their own analysis that 70% of Microsoft's AI revenue is coming from OpenAI, a company which of course Microsoft had invested in. So I think it's a fair thing to say that Microsoft is investing money in OpenAI and the money is coming back to them in the form of their AI revenue, which literally is most of their entire AI business. You brought up a, a, a important point.

• 9:41Ed Elson?

  You know, if we see a price war come into play, if anything goes wrong for OpenAI and Anthropic, both of whom are losing billions of dollars, then the whole thing unwinds.

• 9:53Speaker 07

  Losing billions is, is a euphemism.

• 9:57Speaker 07

  If only they were just losing billions.

• 9:59Ed Elson?

  Right, losing a lot more than that. So, I mean, the question to me is, how likely is that if? To me, it's quite likely at this point. To me, it seems as though the signs are going in that direction. And at the very least, I would expect the likelihood of that if to be priced into some extent. But when I see the S and P trading at record highs.

• 10:21Speaker 07

  Markets don't work that way.

• 10:23Ed Elson?

  Okay.

• 10:23Speaker 07

  I mean, you know, the, the, the news is still, the economy is still good. If there is a price war, the market's gonna have to have it head over the head by a two by four. Because it's been a bull market for so long, everybody just buys every dip.

• 10:36Ed Elson?

  In other words, it's purely reactive at this moment versus proactive and predicting what might happen.

• 10:42Speaker 07

  It's not going to be proactive at all. You know, Michael is trying to anticipate. God bless. He's got more guts at this point than me because I, I just think it's, for me, it's premature. I'm waiting if it does happen. And I mean, I mean, you think it's very likely and, and I wouldn't necessarily disagree, but it could be a year from now. So that's the thing. I mean, if it's a, if it's two months from now, that's one thing. If it's a year from now, then all these companies are going to be spending money like they'd like they've been spending money. And it's the same story.

• 11:19Speaker 07

  So assuming that Anthropic and OpenAI do get into trouble, the operative question, the real question is, when? How long is it going to take? And, and I don't think anybody, I certainly don't have an answer to that question. And I don't think anybody else has an answer to that question at this point.

• 11:36Ed Elson?

  To what extent do you think that other investors on Wall Street? To what extent do you think the market is asking the question? I agree with you that no one has an answer. I don't have an answer, you don't have an answer. But you and I seem to be asking that question at the very least, which is instilling a little bit of a sense of hesitancy, or at least anxiety around the whole ecosystem. Do you think that people are asking the question? Or is it the numbers are just too exciting? No one cares.

• 12:04Speaker 07

  I wish I could answer that question. It'd be nice if we could all get all the investors a room and do a little group therapy. And then we could have an answer.

• 12:11Ed Elson?

  Take a survey.

• 12:13Speaker 07

  But otherwise, you know, I don't know. I've, I've, I just don't know. I mean, you know, I mean, one thing that I'm even a little surprised about is the fact, I thought that when the 10 year climbed above four and a half percent, that was, that could be a demarcation line. And it hasn't, you know, if, if, if the market's going to get a correction because of rates, I think the 10 years got to go probably above five. So it's definitely a bull market. You know, things get shaken off. I mean, I'm surprised by the fact that I thought Meta's numbers last week were hellacious, just awful. And the stock has, you know, went down for one day and climbed back up.

• 12:52Ed Elson?

  Which part of their numbers were you most concerned about, the spending?

• 12:55Speaker 07

  Two sets. So one was 28% revenue growth, which is fine. 55% expense growth. And then 785 million in free cash flow.

• 13:10Ed Elson?

  Yeah.

• 13:11Speaker 07

  Which is basically nothing. You know, a company like, like I was describing before, that used to throw off cash like it was water, now has no free cash flow. None. And, and the other thing, you know, when you dig into the numbers, which was interesting, is the depreciation of the chips is starting to hurt. I think it was something like six billion in the quarter, up from like four billion, maybe three months ago. I could be off, but not by that much. But what's starting to happen is all that CapEx, which went on the balance sheet, is now starting to roll through the income statement. And that's going to be a weight on them for years.

• 13:55Ed Elson?

  If you had to think about how this will play out over the next several months or so, I mean, Burry is saying this is the top. Or are you saying it's possible that this is the top?

• 14:07Speaker 07

  I don't, I don't know how he could say that. I mean, I mean, you could say it, but I don't, I don't really know how you could say it. I mean, there's no, it's again, it's not like subprime when we had the securitization data, where he and I both had this came securitization data. There's no, he doesn't have a data point that you and I don't have. So if he had some evidence that, that there was a price war breaking out on, between Anthropic and OpenAI and the Chinese models, I'd say, okay, you know, he's, that's, that's a very important data point. And he's got a point. But otherwise, I just think he's, you know, with all due respect to him, I think he's just putting a finger in the air and saying, okay, let's give it a shot.

• 14:52Speaker 07

  And maybe he'll be right, but, but I, he, I don't think he has any data that he could point to. I mean, look, like, like I said, bank credit quality was great. Employment data is very strong. You know, what, what data point can you point to right now that would say this is it?

• 15:09Ed Elson?

  What would you want to see if you were to call a top in that regard? What would you be needing to see? You hinted at it with some of the pricing data, yeah?

• 15:17Speaker 07

  Again, I need a price war. I need a price war in, in the LOM world.

• 15:21Ed Elson?

  And until we don't get, until we have that, it keeps going up.

• 15:24Speaker 07

  Until we have that, things will continue to, I think, go on kind of the way they have.

• 15:29Ed Elson?

  All right. Steve Iceman, host of the Real Iceman Playbook. Steve, we always appreciate your perspective. Thank you so much.

• 15:37Speaker 07

  It was a pleasure to see you again.

• 15:42Ed Elson?

  After the break, an update on tariffs and Iran. And for even more markets insights, you can subscribe to my weekly newsletter, Simply Put, at simplyput.profgmedia.com.

• 16:00Speaker 00

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• 17:31Ed Elson?

  We're back with Prof G Markets. Between the war with Iran and new tariffs, global supply chains are facing major upheaval. Yesterday, Iran and Oman agreed to a new route for ships transiting the Strait of Hormuz and are closing in on a deal. But Iran says it won't open the strait until the US lifts its blockade. Over the weekend, President Trump pulled back from, quote, "the biggest attack since World War II", in order to give diplomacy another try. He warned that the latest negotiations are, quote, "the last chance to end the war." At the same time, the Trump administration has injected fresh uncertainty into global trade. At the end of July, Trump invoked Section 301 of the Trade Act of 1974

• 18:13Ed Elson?

  to impose sweeping new tariffs on 60 economies, covering 99% of US imports. On Monday, 25 states sued to block them, arguing the administration is using Section 301 to replace the IEEPA tariffs. Of course, those are the tariffs that the Supreme Court struck down earlier this year. So we wanted to get a better understanding as to what is actually going on here and how everything is affecting global supply chains. So who better to speak to than Ryan Peterson, CEO and founder of Flexport? Ryan, thank you so much for joining us. It's been a while since we last chatted. I just want to make sure everyone understands your expertise. You run a logistics firm.

• 18:53Ed Elson?

  You have a really good insight into how supply chains are moving around the world when it comes to freight. And of course, this is what is largely being affected by tariffs and by the war in Iran. And both are on again, off again. I can't get an understanding as to what is actually happening. What is happening? What do you read?

• 19:12Ryan Petersen?

  I think your summary is pretty good. It's, it's, it is confusing because it's on and again, off again. There's been, the Iran war especially is just like really difficult to understand. We've had so many different peace deals and last chances already that it's hard to really get a sense for like how that's going to play out. My predictive powers on that are not, not that great. On the tariffs piece, also, we have quite a bit of uncertainty, although I would argue a little bit more than we had before these Section 301 tariffs came out. Because, well, they're going to go, they are going to go and get challenged. As you mentioned, there's states suing, there's a lot of other lawsuits as well. The Section 301 tariffs have a longer track record of surviving these lawsuits. There's a bit more process behind them.

• 19:57Ryan Petersen?

  Aipo is kind of like of really blanket authority that, as the president interpreted it, where he could just wake up on the wrong side of the bed and somebody pissed him off and just like throw a tariff at a country. And Section 301 requires a lot more process and they've gone through that process. They've created these, the Commerce Department, excuse me, has done these studies to say this or that country, the sector, it's been a lot more detail, a lot more thoughtfulness, let's call it. So they're, they're more likely to stand. I thought Aipo was always a little bit, most people thought it was on pretty shaky ground, so. That's a bit on the tariff side of things. It's a whirlwind if you're out there as an importer or exporter trying to deal with all this.

• 20:38Ed Elson?

  Yeah, how does it affect freight and logistics? If you have a tariff regime and you don't really know what's going to happen the next day, and then say it does happen, like, does that mean that suddenly you're paying those tariffs? Is there a lag time? To what extent does the confusion of all of this actually impact the movement of goods around the globe?

• 20:59Ryan Petersen?

  It is about the uncertainty and it's about the rapid changes as well as high rates. Now, I'd probably like separate those. The last year, we had both, right? Like, high, really high at some point tariff rates, I forget. It was like 145% on China for like a few weeks. And they remain pretty high on China. But so there's the high rates piece, but they're much lower now. Even these section 301 were either like 10% or 12 and a half percent, depending on the country. And that's kind of a manageable rate is what importers are saying. Like, if it stays there and it's stable and predictable, then they're pretty good. Last year, you had both. You had both high rates and a lot of unpredictability.

• 21:42Ryan Petersen?

  So in 2025, there were 52, no, 53 changes to the tariff code in 52 weeks throughout the year. So it was like complete chaos. Some of these things were implemented with no notice. In fact, this one was done with almost no notice because section 122 ended on July 24th at midnight, and this one kicked in at 12:01 a.m. And they announced it just a few hours before that. So very little planning time. And the way that manifested itself was just like a lot of mistakes were made. That companies filed the wrong, paid the wrong amount, filed the wrong duty amount. Then when it comes to getting refunds, have like struggled to get the, you know,

• 22:27Ryan Petersen?

  they got the refund because of Supreme Court, and those have started to flow. Out of the 166 billion of refund that's owed from the AIPA tariff, 122 billion are in process right now. I don't actually have the figure from the government about what's been paid, but there's a lot in that 122 bucket that aren't getting paid out or heavily delayed, in part because it was so difficult to comply that if you filed wrong, you're not, yes, you'll get a refund, but you have to go through this whole legal process to first correct your entry. And then you can get a refund. So people are definitely dealing with the repercussions of like not having their data organized, not having filed correctly.

• 23:08Ryan Petersen?

  I think it's one place, you know, plugged for my own company where we, as being a technology company and having databases for managing this, it's given us a real leg up in helping companies get it right.

• 23:18Ed Elson?

  Well, this is what I was gonna ask you about is the tariff refund process. I mean, we know from U.S. Customs and their reporting, which they had to give over to the courts because of all of the lawsuits, is that apparently the administration has issued $100 billion in tariff refunds since the Supreme Court ruling. But to your point, this is one of the things that you guys specialize in. You actually have a tariff refund calculated to help people figure out how to pay the tariffs or get the tariff money back and actually recover those refunds. I mean, where are we in the refund process? It sounds like it's a little bit of a shit show, but maybe that's too aggressive.

• 24:02Ryan Petersen?

  Well, I would give the government some credit here. I actually thought they'd done a pretty good job. They built this system called CAPE, which is a sort of an attachment or a module on top of the primary technology system of the, of customs, of customs border protection. And they shipped it in just about two months or so, two or three months that it took them to build it, which in the scheme of government building technologies, like quite a feat, actually. If you go back and see, the government technology system for customs is called ACE, Automated Commercial Environment. And it was like this 10 to 15 year debacle to deliver the piece of software. So for them adding a module that's as high stakes and complex as like refunding, you know,

• 24:43Ryan Petersen?

  100 billion, 166 billion in just a few months is, to my view, is a technology is like pretty, is pretty good. I'm kind of impressed. Where the problems are coming about are actually less because of customs. It was actually because of shortcuts that the broker, the customs brokerage and the importing community, these businesses took too many shortcuts. So like when you're filing, especially where you see the pain right now, where people are not getting refunds, because you said it was 100 billion, I hadn't seen that stat, but yeah, that sounds about right. The 122 have been filed for. And then there's 44 or so, 42 billion more, somewhere around there, that are not yet eligible. There are going to be a later process for those types of refunds. But so there's still 20 billion that have been filed for and have not been refunded.

• 25:27Ryan Petersen?

  And what those are is a lot of that is steel and aluminum where people made a mistake. So there's these steel and aluminum duties that were unique in the U.S. Customs landscape. Historically, you would only need to know three things to know how much customs duty you owed. It was the value of the goods, what country of origin are they from? And their HS code, the classification of this, of the code. If you had those three things, you spit out a duty, you know how much you're owed. Now, with the steel and aluminum duties that Trump put in last year, you now have to know of that, it's not enough to know the classification of the goods.

• 26:09Ryan Petersen?

  You got to know of this object, what percent of the value is steel and aluminum? And then you need to know the country of smelt. Where was that steel and aluminum made or cast or smelt, depending on how it was made? So companies didn't have that data. And if they did, they were not very good at like breaking it out in a way that could be stored and could be audited. And so a lot of them kind of faked it. What they would do is say, well, okay, it's 25%. And there's this field when you're, it's pretty technical. So forgive me, forgive me, audience out there if I bore you on this. But there's a field where you transmit the duty amount that's owed. And a lot of people just put the number in there and sent it to the government.

• 26:52Ryan Petersen?

  And they might've got it right in terms of the duty amount owed, but they were supposed to break out the percent aluminum and you only pay. So the steel and aluminum duties, you're only supposed to pay that higher duty amount on the valuation, on the percent of the goods that's made of steel and aluminum. But these people fat, even fat finger it, they were just short cutting it. So now, when you go to get a refund, you can't get a refund on that entry until you go back and clean up the process. And so it's just like a good example of like, honestly, this stuff's not hard. If you have a good database in place and you understand the rules, you can do it. But it's a new field. It took a lot of the customs brokerage community, still hasn't been able to add this database field to their software system. So it's kind of, you're seeing the pain of an industry that just hasn't embraced technology.

• 27:37Ed Elson?

  It's just fascinating, though, to hear all of the complications. And yeah, I guess all of the details technically are boring, but what it tells me is that we have invented so much, such an incredible network of complexity. And I don't see what we've even done it for. I mean, this isn't to collect tariffs. This is to give tariffs back. This is to undo all of the complexity that was originally put in place in the first place.

• 28:03Ryan Petersen?

  I think that's actually a really good point is that at some level, there's this compliance burden that is as high as the tariff burden. I think the direction you're gonna go, the direction things seem to be going in the U.S., but also in Europe and other areas, is that the governments want way more data about what's crossing borders. They want to know, in that steel and aluminum example, where are these, what is it made of? Not just the overall classification of the products, but like what percent of that product is steel and aluminum? Where is that from? And you're going to get to a point where what they want is, they want to know that for every item. What is this thing made of? Where is each of those subcomponents coming from? And modern supply chains are incredibly interlinked, complex, global structures. So like, keeping up with all of that for a company is really hard because you buy something,

• 28:48Ryan Petersen?

  you buy an object and you put it, a component, you put it in your product, but that component has subcomponents that come from different countries. You don't know where, and now, you know, tracing this back to tier one, tier two, tier three suppliers. And I mentioned, it's not just the United States. I mean, these regulations are increasing. Europe now requires when you import wood, you have to be able to show the GPS coordinates of where the tree was grown. So they can, for anti-deforestation, I mean, I think that's a noble cause, but you now need to be able to show where was the tree grown? And then you need a receipt from the trucker to show that this truck did in fact pick the goods up at that, at that forest and bring it to this sawmill. And they want to see that leg monitored.

• 29:32Ryan Petersen?

  And so that's the trend of where things are going. And importers and exporters need to get ahead of this with good database technology to track it all. And you want that database to be networked so that other people can contribute and add to it, et cetera. So I think, I mean, from a flexport standpoint, it's like positioning ourselves. We feel like we've made the right bets technology wise to help people manage this. But it is a bit of a, as a kind of a free market guy, it's a, I could see the burden that this puts on companies. And there comes a point when you're like, government, like, maybe you should just charge me a couple percent more tariff and not make me do all that stuff. Like, what is it you're trying to achieve? It's not obvious.

• 30:07Ed Elson?

  Getting in our own way with ever more complexity and no real purpose, it seems like from my perspective. I'm gonna have to let you go in a moment, but before I do. I just need to get your views on what's going on in the Strait of Hormuz. Is it closed? Is it open? If so, how open? What do we actually know?

• 30:27Ryan Petersen?

  On the container shipping side of things, it's pretty much, you can call it closed. There's like one or two transits a day and it was at peak, it was almost 100. So it's, it's really not, but very, very little container shipping is happening there.

• 30:43Ryan Petersen?

  The tanker is also way, way down, although there are more tankers transiting than container ships. I guess more valuable to those economies. It's, it's kind of a, from a, and my, my world is container shipping, but in the container shipping world, it's sort of a backwater, although Jeddah Ali is the ninth largest container port in the world. That's in Dubai, or it was before, before this war. It's basically that way because it's a transshipment hub. Like lots of ships bring containers there to be, you think of it as a hub for, in a hub spoke network. And that, that traffic is all moved elsewhere. They're doing the route, those transshipments elsewhere, lot in India. And of course they're all routing around Africa.

• 31:25Ryan Petersen?

  The Red Sea has been closed since, really since December of 2023. Almost all container ships are routing around the southern tip of Africa rather than going to Red Sea because of the Houthis, which are an Iran-linked kind of proxy group. So there's no end in sight to this. I think hopefully there's a peace deal, but even that, I'm not sure that it gives enough reassurance because we've had these fits and starts, we've had peace deals. And then the next day you've had ships get attacked. So I don't know that that's going to calm the insurance markets. It's costing about 10 to 15% of the value of the ship just to insure it for one voyage through. And you think about that, it basically turns your, you know, it's, it's hard.

• 32:09Ryan Petersen?

  I don't even know how they underwrote that policy, to be honest, because how do you know what's the odds of a ship getting hit? Is it 10% or not? I mean, it's a pretty catastrophic event, obviously. And it's not just the ship that gets lost. All that cargo, you might, you might have a $200 million ship with a billion dollars of the merchandise on it that can go under.

• 32:27Ed Elson?

  Ryan Peterson is the CEO and founder of Flexport. Ryan, always appreciate your time.

• 32:37Ed Elson?

  It's official. The AI boom has become almost entirely dependent on OpenAI. As we discussed, new reporting from Bloomberg confirms that roughly 70% of Microsoft's AI revenue came from just one company last year. That company was, you guessed it, OpenAI. This would be concerning enough if it were just Microsoft, but it isn't. Barclays estimates that 75% of Amazon's AI revenue is coming from OpenAI and Anthropic. UBS estimates that 30% of Google's cloud revenue comes from OpenAI and Anthropic. And if we were to convert that to AI-specific revenue, well then it would be roughly 75% as well.

• 33:19Ed Elson?

  In other words, if OpenAI and Anthropic didn't exist, big tech wouldn't really have an AI business at all. And the reason that's bad is because big tech has literally bet the farm on one thing and one thing only, and that is AI. Now you might tell me, who cares? Because OpenAI and Anthropic do exist, so everything's fine. To which I would respond, yes, they do exist for now. Because keep in mind, OpenAI lost $21 billion last year. And as for Anthropic, we don't know, but our estimates put that number at roughly $11 billion. So the only way these two companies stay alive is if they continue to be subsidized by someone else. And who is that someone else right now?

• 34:04Ed Elson?

  Answer, big tech. The more you dig in to the economics of AI, the more you realize that it is a house of cards. And that doesn't mean that it is going to collapse, but it does mean that in order to not collapse, nothing can go wrong.

• 34:24Ed Elson?

  Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Shalane, Chris Donahue and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Profty Markets from Profty Media. If you liked what you heard, give us a follow. I'm Ed Elson and tune in tomorrow for our conversation with the one and only Professor Aswath Damodaran.

• 34:53Speaker 10

  This podcast is supported by Anthropic, the public benefit corporation behind Claude. Everyone's got a hard question about AI. Anthropic was built to surface those questions and share what it finds along the way, because there's hope in hard questions. Ask yours at claude.ai/spotify and keep thinking. That's claude.ai/spotify.

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