Financial TITANS Predict AI Bubble BURST

[00:00:00] Speaker 1: Elon Musk just admitted that the AI data center build out is a giant bubble. Uh-oh, that's a huge problem. And then on top of that, apparently some financial institutions have stopped giving out loans to AI companies. Smart. That means the bubble is inches away from bursting. But we have even more depressing numbers for you guys because once you see the size of the danger here in this AI bubble, it is super scary. And you gotta take precautions and it's got the whole story. [00:00:34] Speaker 2: First of all, big shout out to Taylor Ellis who produced this segment and made it easy to understand for those who aren't really in the tech world. But let me tell you what Elon Musk had to say specifically just yesterday. He wrote this on X as of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn't have substantial revenue independent of AI data centers. I mean, that should have been the case all along, but okay, he continues. SpaceX closed $40 billion of debt for graphics processing units, but were investment grade and have Starlink and launch revenue. That means the 200 plus Neo clouds are going to see guppy level death and consolidation. Some will make it through, but not many. Okay, so you might be thinking, what the hell is he talking about? Let me break it down and make it easy to understand. So first, what the hell is a Neo cloud? You might be wondering, well, a Neo cloud is a company that essentially builds the computing structure for AI companies. And CoreWeave is just one example of a Neo cloud company. And I want you to remember the name of that company, Neo cloud, because it's going to come back up later in this segment. Now, the Neo cloud companies are taking on debt to build out their infrastructure. But according to Musk, debt markets are no longer interested in providing the loans to these companies. They no longer agree with or are interested in this business model. And while Meta or Alphabet, which are building out their own data centers, offer other products that provide a revenue stream for their companies like Facebook and Google. Other Neo cloud companies might not really have the same setup or the same type of revenue stream from other diversified aspects of their business model. And by the way, we should also note that there is a pretty powerful figure involved in all of this, who does not want to see the Neo cloud build out go bust. And that person is, of course, Jensen Wong, the CEO of Nvidia. Nvidia has invested into the Neo cloud companies and the Neo cloud facilities use Nvidia's products. Okay, so there's a bit of a mutual benefit type situation going on here. But here's the catch, even the CEO of Nvidia has admitted that there's not enough money to loan to these Neo cloud companies. And so in an interview with CNBC, Nvidia CEO Jensen Wong said this, the demand for Neo clouds is off the charts. What is missing is the working capital to fuel that growth because there's just so much demand across so many sectors of artificial intelligence. There's a scarcity of capital. The demand of the capital is much greater than the availability of the capital that's going to get solved. He thinks it's going to get solved. Only time will tell if he's correct about that. But let's circle back to what I mentioned earlier core weave, right? One of the Neo cloud companies I was referring to. Well core weave is a good example of how, well, the lenders are no longer really interested in providing the loans, the leverage necessary for these build outs. Core weave saw its shares dropped 41% since October 6th as of last Friday's close. Shares of other Neo clouds have also posted double digit declines during that time. So core weave needs to issue bonds, kind of like the US government does, right? With our treasuries, core weave needs to issue bonds to basically finance their computing build out. But there's a problem with that. So earlier this month, the price of their bonds fell so much and inversely their yields spiked so much that their bonds are classified as distressed. So going the bonds route is not really working out for core weave either. Analyst Gill Luria stated that borrowing at very high interest rates in order to build data centers that are increasingly commoditized outside of the hyper scalers may not end up being a good investment. The more leverage we use to build data centers, the more risk we're bringing into the system. And I can't emphasize enough how important that point is, because remember these over leveraged companies are being securitized, right? And so we'll get to that in just a minute, but let's look at this graphic first. So according to Americans for financial reform, just nine companies, guys, that's Alphabet, Amazon, AMD, Broadcom, Meta, Microsoft, NVIDIA, Oracle, and SpaceX have a whopping 3.7 trillion, with a T trillion dollars in debt. And remember how NVIDIA is an investor in core weave, let's talk about that just briefly, analysts expect companies in the S&P 500 to report a 30% jump in third quarter earnings from a year ago. But just two companies, NVIDIA and Micron account for 34% of that growth, according to a Dow Jones market data analysis. And if you're ready for things to get even riskier, I'm not, doesn't matter, it's coming anyway. A new report from Americans for financial reform indicates the following, speculative data center debt is being repackaged and sold to pension and retirement funds, university endowments and other institutional investors in a manner eerily reminiscent of the subprime bubble. Now the subprime bubble had to do with these predatory loans for mortgages basically, in this case, we're talking about over leveraged AI companies, and they're very likely going to fail, and they're involved in your portfolio, your retirement portfolio, your pension portfolio, I mean, this is a disaster of epic proportions, back to you, Cenk. [00:06:42] Speaker 1: So we've got more disastrous numbers in a second, believe it or not, but let me go through the ones that Anna mentioned. So guys, once they start putting it into your pensions, that's what they call the suckers at the table. So they make money from the loans that they've given, and they've made substantial money because of the very high interest rates that Anna mentioned earlier. Excuse me, and once they've taken a bunch of the interest, they'd love to dump those loans onto you guys so that when they blow up, they go, well, golly gee, I guess they blew up in your pension funds and not on our budget. So sad day for you, and so that's hugely problematic. And we told you earlier too that just like in the subprime loan disaster, the gun is the over leveraging, the trigger could be any given thing. In that case, they were bundling the home mortgages and then gambling on them. In this case, it might be the data centers or the AI companies themselves. Once they go under, they trigger a set of dominoes. That's the trigger. But the gun is this absurd amount of debt that they have taken on very speculative financial risks. Now, the reason I say it's very speculative is because they're like, no, it's okay. They could borrow $800 billion because AI is going to control the world. What if AI doesn't control the world or it takes 20 years for it to control the world? First of all, I don't want it to control the world. Neither do most Americans or world citizens. But even if they are right from a business perspective, what if it takes too long and you're holding high interest rates? So, we talked to you about this before in the context of Trump's properties. The reason that he went into spectacular series of bankruptcies in Atlantic City is because his third and last casino, the Taj Mahal, had gotten interest rates at around 14% on the money that they used to buy and build the Taj Mahal. And everybody at the time thought, and they were correct, that that is way too high an interest rate, totally unsustainable. The house always wins, asterisk, unless it's run by Donald Trump, who took out a 14% interest rate. So, once the Taj Mahal collapsed, so did the other two casinos. They created a domino effect. So, these high interest rates are super, super risky way to build a business. And if your profits don't come, forget not coming in at all. If they come in too late, the interest starts to pile up so much, you can't possibly service it. Just on the timing issues, let alone the substance of your product. So, we're in a world of trouble here, guys. They cannot pay those interest rates quickly enough, given what's happening in this market. And you could tell because Corp Weaver is already a distressed property. Once you're a distressed property, you're inches away from going under. And so, you get into a vicious cycle. So, and remember, once one of these fall, other companies have invested into one another. The AI companies invested into one another. NVIDIA invested into the AI companies and the NeoCloud companies. And then they're going to have that as a problematic asset in their books. They're going to have to write it down. Their earnings will suffer. And then the market will punish them. And off we go to the races. The dominoes all fall. This bubble is going to burst. And we are in massive trouble. And we're going to show you more terrible numbers in a second. But Anna, what were you going to say? [00:10:29] Speaker 2: More terrible numbers. I mean, who cares what I have to say? Like the facts are the facts. And you guys need to know how disastrous these numbers are. So I want to talk about the banks, which of course provided loans to these AI companies. How much money are we talking about here? Because remember, you and I have been talking about this a lot on the show. What happens when the banks ask for bailouts like they did in the global financial crisis of 2008? Because banks also had $450 billion in open commitments to AI linked borrowers, primarily lines of credit. As of the end of last year 2025, of which 150 billion was outstanding. And here's the big question, guys. This is the real big question here. Is the market going to get serious about all of this obvious unreasonable risk before or after Anthropics impending IPO? Because look, we've talked about this before. Anthropics revenue was $16.3 billion in the first half of the year. That's impressive. That's impressive, right? But there's that catch. What am I talking about? Anthropics net loss was $80.7 billion driven largely by a one time charge. Stunningly, the company has committed up to $807 billion in contracts for data centers, chips and computing power, many of which cannot be canceled over the next 10 years. So again, they brought in $16.3 billion in revenue, but lost $80.7 billion. [00:12:05] Speaker 1: In the first half of the year? [00:12:07] Speaker 2: In the first half of the year, yes. [00:12:08] Speaker 1: Okay, so these losses, as far as the eye can see, how are you going to get return on investment on your massive interest rates, at least for the neocloud companies? And so let me flesh out some of the other problems here. They're hoping to raise $100 billion in their IPO when they launch in the stock market. But already analysts are saying that won't be enough to service the $807 billion in contracts. They're going to need more immediately afterwards. But this is all speculative. We have no idea if the $807 billion in contracts are going to work out for Anthropic, and how long before they work out. So no, no, this is an epic disaster. How could these people not see it? It's insanity. And I think at this point, Anna, they do see it, and that's why Elon is giving that warning. That's why Elon, in my opinion, is trying to merge all of his companies so he can say it's too big to fail. That's why OpenAI is saying, well, this is basically a public good, so the government should be an insurer of last resort. Meaning when we go under, you're going to need to bail us out. And so now to the point of needing to bail them out, if you can't do it with $100 billion, which is a spectacular IPO when you launch, how much is it going to need? No, this is totally unsustainable. And did you hear that part where the contracts are not cancelable? My God, that's an extra burden on your balance sheet. That is an enormous financial problem. If you can't cancel those contracts, you owe that money no matter what, no matter what happens to you in business. So even a slightly wrong turn, and you've got all of this debt and all these obligations on your books, they're gonna drag the company down. There's almost no question about it. Then, okay, a company goes under, you can say, so what? That's capitalism, right? No, guys, there's two giant problems. Number one, almost all the growth in the markets are from just a couple of companies, as Anna pointed out there. 34% of the growth is just from two companies related to AI. So if those two companies have problems, that drags down the entire market, which then creates another vicious cycle. But the most important vicious cycle of all is the same thing that made everyone panic so much about in 2008. And they never fully really clarified that for you guys. So I'm not sure you understand why the panic will be so large for the people in power once this bubble bursts. Because the banks are all levered up to the gears. And as Musk said, they're not giving anymore because they realize now their leverage to these companies are dangerous. If you borrow a little bit from a bank, the bank owes you. If you borrow a lot from a bank, you own the bank, okay? And so that's the old model that Trump used to use for not paying his debts. But the banks all give short term loans to all the other corporations. So once the banks go under because of all this debt is not going to get repaid. Then all the other corporations have no money at all to operate their businesses. And that's when the entire economy melts down. And we are perilously close to that, almost certain to happen. So buckle up and brace for impact. [00:15:45] Speaker 3: This is going to be a gigantic crash. Let me start with the thing that I'm most curious about because I sat here with an investor called Jeremy Grantham, who you might know. He told me that we're staring in the face of an AI bubble and therefore a economic collapse potentially. [00:16:00] Speaker 4: If you look at the data, it would be compatible with history for the peak to be very soon. Everything is in line. This is, I think, the biggest investment bubble in American history. [00:16:12] Speaker 5: What's your perspective on that? He's right. I don't want to jump to conclusions as much as I want to explain reasonings that lead up to conclusions. I'm at a stage in my life that I want to help people understand cause effect relationships. [00:16:26] Speaker 1: So that's Ray Dalio. He is one of the best investors in world history, one of the wealthiest men alive. He also predicted the 2008 economic collapse. And he's now warning, watch out, buckle up, brace for impact because this bubble is going to blow. So Elliot, there's a lot more where that came from. Tell us all about it. [00:16:49] Speaker 6: Yeah, we're going to dive into more of Dalio's predictions in just a second. But first, we should probably check in on how the market is actually doing right now. So the Trump administration, including Treasury Secretary Scott Besant, are stating that a deal with Iran is within reach, which might sound kind of familiar. But as it turns out, investors are literally buying what the Trump administration is selling. So both the S&P 500 and the Dow Jones Industrial Average topped prior records. The NASDAQ 100 rose about 3%. Brent crude fell below $80. And a financial markets economist also stated, from watching the stock market zoom higher over the past three sessions, you wouldn't think there's anything wrong with the world. I could probably name one or two things wrong with it. But now let's hear more from Dalio. And first, we're going to watch him explain exactly how these bubbles actually start. [00:17:47] Speaker 5: What they call a bubble is when the price goes up a lot and companies do very well, and then it collapses. And that has implications for the economy, that has implications for the markets. Like 1929 bubble, okay, or the 2000 bubble, okay, which is the dot-com bubble. [00:18:10] Speaker 3: Does it impact real people as well, because you said the economy- [00:18:13] Speaker 5: Did 1929 bubble bursting impact real people? Yes, the Great Depression follow. Because what happens is there's a new technology that comes along that's revolutionary. The dot-com bubble, which was 2000, all the stuff that we have that's wonderful new technology. People get into that technology. They say, that's miraculous. I can bet on that. I'm sure it's going to be successful. And then they bet on it. And sometimes they borrow money to bet on it and they lose sight that the price of it matters. So it goes up and up and it's everybody's thing, you know? [00:18:50] Speaker 6: Okay, so now we understand a little bit more about how market bubbles start. Now let's learn how they actually end up bursting. [00:18:57] Speaker 5: Wealth is not the same as money. So you see a lot of people getting wealthy, but you can't spend the wealth. You have to sell the wealth to get money because you can only spend money, right? So what happens is when they need money for one reason or another, taxes change or interest rates go up. And so they have to pay their debt service and so on. There is a pricking of the bubble so that what happens is it falls, okay? And when that happens, people lose money. And as they start to lose money, the process works in reverse because when they made a lot of money, they have a lot of collateral, right? They can go borrow money because they're worth a lot. And that compounds on its way up. And then when it comes down the other way, it works the other way. Okay, now you got to pay your debt. And so when then you have to start to sell assets and then there's less demand for things, right? So there's less demands because if you're losing money because you put some money in the stock market and that company and so on, you're going to spend less. And as you spend less than somebody else's income goes down, right? [00:20:08] Speaker 6: Yeah, Dalio also pointed out another big problem to worry about, which is that these bubbles are especially worrisome, and this should definitely sound familiar, during times of extreme wealth inequality. [00:20:23] Speaker 5: We also have some other things that are going on that happen around the same time. A big gap between the rich and the poor, and which also means the left and the right, the politics of it, right? Just as we have now, when you have the downturn, then you have people at each other's throats. So if we take politics, what you see is this, that they don't have enough money. The governments don't have enough money. We have big budget deficits. Okay, where do you get the money from in order to pay those bills? The UK has had, I think, six out of the last seven years, there's been a new prime minister. And because there's not enough money for the government, and so what you start to see is people come in with their claims. But there's this, how do we get the money? And then people run, who have money, they say, I don't want to be in this tax zone. That's going to be, and then they leave. And so there's a domestic political problem that is not people compromising the same way they used to compromise, right? [00:21:22] Speaker 6: Okay, scary stuff. So Cenk, I want to get your thoughts here. But as I understand it, only about the, I think, top 10% of US households own the vast majority of equities. And so it can be kind of easy for people to just let this stuff go in one ear and out the other. But like Dalio pointed out, this stuff has affected working class people historically. So what do you make of all of this? [00:21:45] Speaker 1: Yeah, so I think that the top 10% of about 90% of the stock market. So, but the 10% affects the rest of us through our 401ks and pensions that invest into the stock market. And obviously, any amount that an average person loses is much more devastating than even if a super wealthy person loses a quarter of their wealth, they're still going to have an enormous amount of money. And, but much more importantly, the amount of jobs you lose and how it devastates the economy is what's the most important. Well, it's about 12, 13 million jobs in the 2008 crash. And they weren't banker jobs, the bankers got bailed out and paid their bonuses. And so it was actually the average guy who suffered the most, of course, as always, right? So now, Elliot, I also interviewed Ray Dalio a while back, a couple of years ago. You could find it up on YouTube. And one of the things I asked him that compounds this problem was, okay, yes, there were different times that it looked like the economy was on the ropes, who couldn't get out. But then the Federal Reserve would normally come in. And in the beginning, they just printed money, and that magically got them out of a lot of these messes. But you can't print too much money. And then they started buying toxic assets. That happened in 2008, and then it happened a couple of times after that as well. And we don't really know what that means. They buy it from banks, and some of it is worth some money, and then they wind up selling it. And then the Fed makes a profit, which doesn't make any sense at all. But some of it is actually toxic, and they can't sell it, or they do sell it at a great loss. In which case, the Federal Reserve has lost money. Again, this is just nonsensical talk. They're just doing things that don't make any sense. And it's not just me saying, it's Ray Dalio, again, one of the greatest investors in world history saying it. And then when I asked them about it, okay, but what happens in the next crisis? And here we are on the edge of the next crisis. And he said, I think we're out of bullets. I don't think the Federal Reserve can just buy their way out of this situation. And so, yeah, if we're all right about this bubble. And by the way, Elliot, it should be noted, Wall Street, almost everyone on Wall Street disagrees with us. So whether it's Ray Dalio, some of the top experts in the world, or us here that are not in the financial world but are looking at it and going, that looks mental, right? When I talk to reporters and analysts inside Wall Street, they're in their own bubble. And what they're saying is, and this is usually what they say right before collapse, no, this one's different. It can't go wrong. And I'm like, God, no, okay. So I ask, why can't it go wrong? They say, no, no, this time there's just too much money. People have too much money and they don't know where to put it. So where else are they going to put it? I'm like, I don't know, treasuries under their pillow, real estate. There's a lot of different places you could put money if there's a crisis. So I think they're in la la land. Maybe we're all wrong and Wall Street's right. But yeah, if it turns out that Dalio's right and some of the top experts that are equally waving giant red flags are right. Yeah, we will have a massive economic collapse and it'll cost an unreal number of jobs. [00:25:03] Speaker 6: Yeah, I mean, I'm a millennial and I feel like it's like a rerun. And I've seen this program before and it's not my favorite. And I also think that when there's all this talk going on right now about, you know, which I know we're going to get to in a little bit, but like why DSA candidates are doing well. And there seems to be this sort of like resurgence of a red scare thing. I think this is a great example of why because people, especially young people, have watched time and time again the economy start to just completely fall off the rails. And then usually, of course, who bails them out is working class people. So it's just kind of exhausting. And I think people have a right to sort of just be like, okay, I'm tired of hearing about how it's going to burst or not burst. How does it affect me? But the reality is it does. And I think it's just kind of wearisome after a while. [00:25:46] Speaker 1: Yeah, well, look, I think you're right to bring that up because I think there's going to be political consequences too. And there's going to be a rage in this country. And I'm worried it's going to be a rage larger than any we've seen before because we've had enough of this. We've seen this now so many times and every time they're wrong and we're right and they tell us in a patronizing way that we're wrong. And by the way, guys, if you're wondering, well, so who's right and who's wrong? Okay, raise an amazing investor. He's very forward looking, but he's against the consensus on Wall Street. Can the entire consensus be wrong? Well, it's been wrong many times, right? The entire consensus was wrong in 2008 and in 2000 and in the Great Depression and many other times. So how can you tell who's right and who's wrong? Well, Ray Dalio and Warren Buffett got to be great investors by doing the opposite of conventional wisdom. Why? Because conventional wisdom is very, very often wrong. And Warren Buffett says something really simple. He says, every time he's asked how did you amass this great fortune and you're just a rando from Nebraska, right? And he said, look, it's actually relatively simple. It's just that people can't get themselves to do it. You buy low, you sell high. But when everybody's selling, everybody panics and nobody buys low, they sell low. And when everyone's buying like today, nobody thinks, this is too high. They're like, everybody else is buying and they get FOMO. If you're missing out, I'm gonna buy, I'm gonna buy, I'm gonna buy. And they can't help themselves as human emotions that get involved. So that's why these bubbles get created and that's why they pop. And final thing on this, Elliot, is Ray Dalio said something there that I don't want you guys to sleep on. So when the 2008 crash happened, we were on the air because we're ancient and we've been around forever. We're as old as time. And I spent a solid two years explaining to people to exhaustion. The housing market was the trigger, but collateral was the gun, right? So if you make a simple bet and you go, okay, I think the Chargers are gonna win and you have $10 and you bet $10. And you lose it, that's a personal tragedy, but it doesn't affect anything else. But if you borrowed $10 million to make that betting, you don't have the $10 million. What usually happens, especially in the Wall Street and the financial world, is it creates a series of dominoes, right? And that's why all the banks fell at the same time in 2008. And so I don't wanna freak you out more, but recently there was a story we covered about they've now loosened the collateral requirements. So don't worry, you can borrow more and more and leverage yourself up. And when disaster hits, that leverage is going to be the weapon that destroys our economy. [00:28:37] Speaker 6: Yeah, it makes me feel really good about my student loans. So I think that's the one silver lining here, I guess you're going, okay, well, at least everything else is gonna tank. So I have nothing to worry about. Great stuff. [00:28:52] Speaker 1: Well, I mean, look, if you borrowed a lot of money and then you get a massive inflation, well, one of the upsides will be, well, sorry. Oops, what can you do? Okay, but please do not plan for that, okay? No, no time soon. But you do have to brace for impact, guys. We are very worried about it. And so I don't know what you can do, but make sure you're prepared because things can get pretty bad. Every time you ring the bell below, an angel gets his swings. Totally not true, but it does keep you updated on our live shows. Every time you ring the bell below, an angel gets his swings. Totally not true, but it does keep you updated on our live shows.