Get In Loser: We're Exposing the AI Bubble
It’s a bubble. Everyone with basic observational skills can see it.
Look at the headlines coming out about Nvidia chips, Silicon Valley AI startups, new labs, and the government’s investment in all of this. Read between the lines. There’s a lot of BS underlying everything that’s going on right now.
The good news is the bubble is going to pop.
The bad news is this is going to get a lot worse before it does.
Visual learner? Check out the animated companion site to this post.
State of the AI
OpenAI made ChatGPT. You’ve used it unless you’re living under a rock.
It’s aimed at replacing people with median intelligence. The median IQ in the US is 98. That means half the people you encounter walking through the airport on any given day have intelligence below 98 IQ.
There’s no problem with that. Everybody has the same amount of human worth. The most important dimensions of being human don’t have anything to do with IQ. But if we’re ranking ChatGPT against the median American purely on that metric, we can say with certainty that ChatGPT is more intelligent than the average American on IQ.
Most jobs in the US are knowledge jobs now. If you go into an office, you’re a knowledge worker. Your IQ determines what knowledge worker jobs you can get. I know what my IQ is and I know I probably don’t have the mental firepower to be a rocket scientist or neurosurgeon. Or honestly, probably even a software engineer or engineering manager. But here we are.
The core narrative is that AI will replace humans. For a lot of knowledge work, ChatGPT shows real promise there. If you have a bunch of folks doing data entry and LLMs do data entry very well, why do you employ so many people doing it? Even at 1% less efficiency, you have a human checking outputs while the AI works 24/7 at scale, faster than a human, can cite sources, doesn’t have personal drama, doesn’t take PTO, doesn’t celebrate holidays, doesn’t sleep.
This is one of the perils of over-indexing on IQ as a measure of human worth. Did you know IQ is the most direct predictor of lifetime earnings in the US? That’s a huge red flag. It means our capitalist system isn’t incentivizing emotional regulation, creativity, or even a strong moral framework. Just intelligence. Just who’s smarter in a very limited very narrow measurement framework.
I thought the cornerstone of the US economy was the farmers, the plumbers, the people who build things. The engineers. The mothers. The teachers. The priests. Anyone working their ass off just to get by.
Hardware
ChatGPT doesn’t run on your computer. OpenAI depends on Nvidia technology. GPUs and other compute that are really good at performing the algorithmic operations underlying an LLM.
It’s not enough to just have a bunch of GPUs lying around. You can buy 100 GPUs and they’re not going to do anything unless you put them in a system. To put them in a system, you need a big fucking system. And once you have a big fucking system, you need the intelligent people who can run it, control routing, distribute load when everyone’s using ChatGPT at the same time. You need a data center and people who know how to build them, which requires supply chain knowledge, construction knowledge, lobbying with local groups for favorable utility rates.
In our capitalist society, there are companies that do this. Oracle is one of them.
You’re starting to see how the money flows circularly.
Follow the Money
Nvidia pledged to invest $100 billion in OpenAI. But it comes with a catch. “We’ll give you $100 billion, but you build on Nvidia hardware. Don’t go thinking about those newfangled processing units Google is building. You use Nvidia.”
So Nvidia gives money to OpenAI. OpenAI agrees to use Nvidia compute. Downstream effects cascade. At data center construction scale, it’s a gold rush.
Two weeks ago, Micron Technologies, one of the five largest RAM manufacturers in the US, announced they’re not selling to consumers anymore. Only to Oracle and other data centers. Because data centers can give them a bajillion dollars upfront whereas you, looking at how expensive milk and eggs are, can’t compete when bidding on RAM sticks. So they’re just not going to sell to plebeians like you and I anymore.
This is the end of the personal computing era. In the future, you will own nothing and be happy. You will rent your compute instead of owning it. This era spanned 1980 to about 2023 when things started going downhill.
I remember one of the first computers I built as a kid. My dad would bring home scrap parts from the office IT department. I’d cobble together a PC from processors, RAM sticks, motherboards, towers. You’d boot it with Windows, type in an activation code, and once that thing was running, you could disconnect from dial-up. It worked just fine. Encyclopedia access through Encarta 95. Word processors. Photoshop. You could write programs and execute logic on your machine. And who couldn’t see it because you weren’t connected to the internet? Anyone you didn’t show it to.
That era is ending. Not long from now, you’ll own a very low spec machine similar to an iPad that hooks up to your screen, but any heavy operations take place in data centers that you’ll pay a monthly fee to rent. You will no longer own your own compute because you cannot be trusted with it as a private citizen.
Rural America Gets Bulldozed
You gotta put those data centers somewhere. They’re not going in Los Angeles. So where? Wisconsin. Michigan. Ohio. Anywhere the land is cheap.
You need all the smart people to spec it out and build it. Supply chain, logistics, specialized construction. Look at the stocks for companies specializing in data center construction. Exponential this year.
But you want cheap land. That land is usually in rural America. And in rural America, you have farms.
Once you’ve built the data center, you need technicians. You’re not recruiting Silicon Valley engineers accustomed to San Francisco amenities to move to rural Iowa. They’ll say “You can pry the Phil’s coffee from my cold dead hands because I’m not leaving the Bay.”
So what do they do? H-1B market. The current administration, despite vowing to be strong on borders and champions of American workers, has been extremely permissive about expanding H-1B and importing workers.
At worst, it’s a concerted effort to drive down the price of American labor.
I have nothing against H-1B employees. I’ve worked with intelligent H-1B workers and unintelligent H-1B workers, just like any US citizen. But the numbers don’t lie. Flood the labor pool and you drive down the price. I have more proof on this, drop a comment if you’re interested and I’ll detail it in a Substack post.
These data centers are in a pinch in rural Iowa. They need people, can’t get them from San Francisco, don’t want to pay $400K. So they offer an H-1B a chance at citizenship for $120K and if they’re told to work 100 hours a week, they can’t say no because they’ll send them back. This not only suppresses the wages of American employees, it locks out the next generation of American citizens hoping to enter the field, and it puts H-1Bs in a brutally tough spot, they have very little bargaining power for workers’ rights and if I’m a strong proponent of anything it’s that workers have maximum power to push back on oppressive or exploitative leadership!
So, captive labor force. And that captive labor force could possibly buy a house but if you were in that position, why would you, knowing that you could be banished from the country for any small job infraction? So they rent. They want something decent. They’re earning $120K in rural Iowa, which goes a long way. They work the 80 hour weeks so they want a nice place to hang their hat.
So luxury apartment builders come in. Build “The Camden” or “The Tanner.” Beautiful residential complexes built cheap as fuck but laid out with all the Walmart accessories people associate with wealth. They charge a premium compared to surrounding areas.
Local farmers get offered money to sell their farmland for data centers. Who wants a farm wedged between two shithole data centers? Washington has done everything in their power over the past few decades to punish farmers so they sell, then look around and think “I’ll get into the real estate business.” That’s not a moral failing on the part of the farmers, it’s a failure of our government to make the most essential profession lucrative. Our leaders always seem to forget where their food comes from.
Real estate values go up and up and up.
Just like the era of personal computing is dying, the era of private home ownership by American citizens is probably already dead in most of the country. This is going to reach well into rural America because that’s exactly where you’d want to build a data center.
Sidenote: know who the largest private owner of farmland in America is? Bill Gates. Makes you wonder if he saw around the corner on data center construction.
The Circular Scam
Let me walk you through the whole bubble:
Nvidia and Oracle invest in OpenAI, which by the way, generates no profit. Your $20 subscription, even your $200 subscription, doesn’t cover their costs. They are hemorrhaging money.
OpenAI, generating no profit and losing money, buys Oracle hosting and Nvidia compute.
Every time this flows around the circle, more people get involved. Everybody and their brother is getting in on the party. Which is how you know the bubble is about to burst.
The government endorsed $500 billion via Project Stargate. Apparently AI is a huge priority. I don’t know who decided that. Doesn’t feel like the top priority. The top priority feels like people can’t buy houses and it’s hard to buy groceries.
OpenAI gets that money. Buys more data centers from Oracle filled with Nvidia chips. Nvidia and Oracle get huge profit. They invest that back in OpenAI. Which does not make money. And the cycle repeats.
This is a self-reinforcing bubble.
Jerome Powell publicly stated AI is now the cornerstone of the US economy.
Which is bonkers.
I thought the cornerstone of the US economy was the farmers, the plumbers, the people who build things. The engineers. The mothers. The teachers. The priests. Anyone working their ass off just to get by.
It’s insulting that the person controlling our money supply would say all those roles are optional.
And of course the government follows suit. This administration, by all appearances, has turned its back on average American citizens. Walked back pro-citizen campaign policies. Imported more H-1Bs. Done more to squeeze the middle class than maybe anyone in American history.
Setting the stage for bailouts when this bubble pops. Doesn’t matter what happens to you or me or the American worker. We’re concerned with keeping OpenAI, Nvidia, Oracle paid. Making sure they get their paychecks before the bus driver does.
What This Means For You
Unaffordable homes. Unaffordable and maybe unattainable private computers. No privacy in computing anymore. Every bit of code you run, every bit of code you write, will be seen by whoever has a backdoor.
Unaffordable energy. Data centers drive up electricity costs. We’ve already seen this where data centers get stood up and suddenly people have to conserve because their energy bills doubled or tripled.
And maybe worst of all: intellectual dependency. As people outsource their decision making to chatbots, they lose the ability to think critically, to be patient, to let human emotion factor into decisions. Which is now treated like a dirty word. The opposite of rationality. We don’t want it. Chatbots are rational. The computer is logical. And you’re just a stinky, illogical, emotional human that eats food and produces waste. We don’t need you.
Why It Will Pop
I hate to paint this grim picture but this is what’s happening.
Anthropic, Google, they’re all in on this too. And when I say “in on this” I don’t mean it’s a conspiracy where Sam Altman and Jensen Huang are having beers planning how to screw over the American public. That’s not what they’re doing. I don’t for a minute believe this bubble is intentional. I believe it’s greed-driven. They can make insane money off this and people are weak. Susceptible to greed. Multi-generational wealth so you and your descendants never have to worry about money again.
When that’s in play, people do less due diligence than they should.
My evidence for why this pops: you’re starting to get hucksters and scam artists involved. There was and still is good development. I get immense value from LLMs for coding and automation. They’re honestly a great tool.
The issue is them being positioned as general intelligence machines that can replace humans. That’s insulting.
The issue is everybody and their brother wedging AI front and center into their digital products. People telling you how to make money off it. Some legit, a lot of it isn’t.
All it takes is someone running a scam that gets big enough and then exposed. The media picks it up, public sentiment snaps back, and the bubble pops. Someone gets caught with their pants down. They didn’t have as much to offer as they said. The public turns on them. The government turns on them. The media turns on them.
People yank investments. Everyone panics and cashes out. Markets crash. Downstream effects crash. I think it will be way worse than 2008. It’ll make 2008 look like a blip.
If you don’t believe me, this just happened with cryptocurrency. Crypto had great promise. Anonymous transactions, no interest being charged, undoing fractional reserve banking. Huge threat to a lot of livelihoods. Cool technology. Mysterious origins. Interesting use cases like decentralized applications.
Then the FTX scandal broke. Sam Bankman-Fried got greedy. Scam exposed. Public sentiment totally turned. Cryptocurrency became some scam thing where somebody’s trying to take your money.
That’s why I feel in my bones this will happen within 2026. Probably halfway through. Some major scam gets revealed. Public sentiment changes. The companies propping this up will panic and sell off shares. Musical chairs. You don’t want to be left standing.