Intel and Broadcom CEO's Warn AI is Running Out of Capital - AI Data Centers are a Failed Business

[00:00:00] Speaker 1: Coming from CNBC, Intel, Broadcom CEOs warn Capital Crunch could become AI's biggest bottleneck. Because obviously the most valuable technology stack to ever be created. A technology stack with a $30 trillion total addressable market. Obviously the biggest problems for these technology companies is actually getting their hands on enough money to build out all of the infrastructure they need to build out. So this is a particularly weird article because the more you read it, the more you realize these AI companies have not actually proven the value of the AI products. And so the issue that's going on right now is all of these AI companies have these glorious plans for trillions and trillions and trillions of dollars of build out. But the debt markets, the people that essentially loan money, they're getting a little skittish on loaning money. The equity markets, when you buy stocks from companies, those people are also starting to get skittish. The private investors, again when companies are still private, they're getting skittish. And weirdly enough, we keep hearing about ARR or annualized revenue or annual recurring revenue. You know how those numbers are really, really, really big? Like oh my golly, look at how fast the revenue is growing. You notice how they've never talked about profit. Like real profit. Like Anthropic comes out with these weird profit-esque numbers, not real profits. And the problem that they're running into, right, is they're running out of money that they can beg from people. And their products actually are not that profitable. Probably not profitable at all. And so they are running out of money to do these absolutely insane build-outs. And yeah, this article just gets so stupid at the end. It's like when you get to the end, you're just like, what the hell? The chief executives of Intel and Broadcom warned that access to capital could emerge as a major constraint on the AI boom, even as demand for computing infrastructure continues to outstrip supply. And I really want you to think about this for a second, right? We hear about this demand all the time, right? The AI is compute constrained, right? The only thing stopping, you know, more artificial intelligence is literally more hardware resources. But when you start looking at what these AI companies are providing, a tremendous amount of the services that they're providing that are burning tokens, burning cycles on their hardware resources are literally free. They're literally free. It appears, like when you look at Anthropic or OpenAI, it appears something where between 40 to 60% of their user base are free users. Free users. On top of that, even when they have the people pay money for the tokens that they consume, it appears even then they're losing money. So if you spend $200 a month on an OpenAI, a ChatGPT subscription or a Claude subscription, from everything that we can tell, the companies are still losing money on that. And not only that, as I've talked about before, we were talking about Anthropic a little while ago, you have companies out there that are spending millions a year on Claude. $1 million to over $10 million per year on Claude. They have these contracts. So they have contracts with volume discounts. And one of the weird things with that is as soon as they get near the end of that volume discount, whatever the bulk purchase is, they have sales agents calling them immediately, basically threatening them that if they don't sign new contracts, well, they can't be held liable for whatever the price is that they're going to pay. Which again is weird. Look, if you want to fuck over your $20 per month users, again, I don't recommend it, but I get it. Fuck them. They're $20 a month users. Like, can you imagine strong-arming your $10 million a month users? That seems a little weird, right? And so that's one of the bizarre things with this, is we hear about how much demand there is for AI, yet most people, the vast majority of people, don't want to pay for AI. And even the people that want to pay for AI are not even willing to pay the amount that would be required to cover the inference costs, much less anything else. And so again, we go back to this whole, I'm sorry. I don't really understand the demand argument here with artificial intelligence. Broadcom CEO of Hock Tan said, financing could become a bigger obstacle to AI expansion than shortages of semiconductors, memory chips, or electricity as the industry races to build infrastructure needed to power increasingly sophisticated models. And again, we go back to this whole thing of, do we need more increasingly sophisticated models? As I've argued in 2026, I think the orchestration layer, the control plane is the most valuable part of the AI stack. Do we really need better and better and better models in 2026? Is it worth investing? Here's the thing. If they had to invest purely off of revenue and profit, would investing in new models actually make sense right now, right? Since they've been getting so much investor money in, right? They can just burn investor money. As I've talked about before, right? They just solved, OpenAI solved this weird esoteric math problem, right? And they come out and they look, look at what AI did. You have to understand, they burned $20 million in tokens to solve this problem. Just to say that they can't, right? That is how much money they are simply throwing in the trash can just to try to pretend that they're significant. And so if they're running, running out of money, maybe they need to figure out their business models before they worry so much about how to get, you know, beg more money out of folks. Quote, what I think might be the biggest constraint is capital, Hawk Tan said at DBS Asia Future Forward Conference in Singapore on Monday. Well, yes, yes. Imagine if I had a pizza business in the United States. Imagine if my pizza business gave away pizza, right? And so basically I told everybody I'm giving away pizza. So I get more and more people coming to buy my pizza. And so then I buy another, another pizza oven and then buy another pizza oven and then buy another pizza oven. And then we franchise our locations. So there's more and more pizza shops, more and more pizza shops with more and more pizza ovens giving away our pizzas. And then we come out with like chicken wings, right? We're going to start selling chicken wings. That is going to be our revenue driver. But when we sell chicken wings, right? Basically, we buy a bag of chicken wings for $5 and we sell it for a buck. So it's like, yeah, we got annualized revenue off of chicken wings. It's kind of ignoring how much money we're losing off of every chicken wing that we sell. Like you think about that. Real story. Real story. Again, we talk about like real business, if artificial intelligence was real business. So years ago, 30 some odd years ago, working my way through life, I actually worked for Little Caesars back in the day. And I was a pizza delivery driver because pizza delivery drivers were a great, great way to make money 30 years ago. So anyways, doing the whole thing with Little Caesars and we were selling pizzas and we also sold chicken wings, right? And everybody wanted the chicken wings. Chicken wings were an amazing seller. And then all of a sudden, coming from corporate headquarters, we were told that we were going to stop selling chicken wings. And so the drivers, everybody in the store were like, why? Like everybody, I don't know what it was. 30 years ago, people fucking hated chickens. They just want to kill all the chickens. Anyways, it was like chicken wings. We were just selling chicken wings all night long. And the reason, the reason corporate came down and said we had to stop selling chicken wings is the problem was, is that chicken is actually really expensive. Like if you look at pizza, if you look at the components of pizza, relatively inexpensive, right? You got dough, flour, water, yeast. You got the cheese. That costs a little bit of money. Sauce costs almost no money. Toppings, a tiny bit of money, right? Pizzas, right? Pizzas are pizzas. Here's the thing, when they buy a bag of chicken wings, that actually costs money. It's like 20 bucks a bag of chicken wings or something like that. That was like a significant outlet. And the issue that they were running into, here's the issue. And again, we talk about employees. Oh, we talk about employees sometimes. Here's the problem. Employees were eating too many fucking chicken wings. Like this was real. This was real. Because the cost of the chicken wings were so high for the base input cost. And the issue was, even though we're selling a shit ton of chicken wings, employees were taking enough chicken wings on the side, eating them on the side, that not only did it kill the profit margin for chicken wings, they were actually losing money selling chicken wings. Because again, they ended up giving away. They didn't mean to give away. They ended up giving away so many chicken wings that it became a loss, right? So now imagine, again, imagine like this was the AI world. Imagine if chicken wings were the AI of the 1990s. Instead of figuring out how to deal with employees eating too many of the fucking chicken wings, or whatever else. Imagine if Little Caesars could just say, "This is a capital problem. This is a capital... This is not a problem with our employees eating too many damn chicken wings. This is not a problem with the price point of the chicken wings. This is not a problem of the input cost of the chicken wings. The reason we cannot sell any more chicken wings is because we do not have enough capital to purchase more chicken wings." Imagine if Little Caesars went out on the debt market and they went out on the private equity market and they went on to all these other markets to try to get enough money to be able to buy more chicken wings so they could sell more chicken wings so they could lose more money off of the more chicken wings that got sold. That's basically what we're dealing with here at Artificial Intelligence. I really want you to understand, like I really fundamentally want you to understand this. If Artificial Intelligence was any other business venture on the face of the fucking planet, it would be considered an abysmal, laughable joke. But for some reason, because it's Artificial Intelligence, "Oh, obviously this makes sense. Obviously this makes sense." Eli, I don't understand, I don't understand what losing money off of chicken wings has to do with losing money off of AI token consumption. They have nothing to do with each other. But anyways, that's basically where we're at now. The problem with these AI companies is not that they don't have a fucking clue what their business model is. The problem with these AI companies is not that people are realizing the ROI, the return on investment of AI, is kind of shit. None of the problems with AI build-out have anything to do with Sam Allman or Dario not having a fucking clue how to actually run a profitable business. The problem with AI is you are not willing to hand over enough money. The real problem here is pension funds are not willing to hand over enough of their people's money to AI to make the future possible. Intel CEO Lip Abu Tan echoed concerns about financing, pointing to the rising cost of capital, and questions over whether companies investing heavily in AI will eventually generate sufficient returns. Yeah, I think that's the problem. The capital isn't the issue. The capital is literally, we are in 2026 at this point, and there is still a major question about whether these companies will generate sufficient return. But, and understand, sufficient, words have meaning? Not outsized returns. Outsized returns is when you're fucking printing money. Right? You put a dollar in, you get a hundred dollars out. That is outsized returns. Booyah! No, this is just like sufficient. This is just, yeah, we're not, I mean, and think about this for a second. Like, think about all the crap we have been told about artificial intelligence. And you have this CEO of Intel coming out saying, yeah, we're not, we're not actually sure we're going to get sufficient returns from this technology stack. Quote, if there's any challenge in the front, it's capital and the cost of capital, and then the other part is in the longer run. People want to see the ROI. They want to see the ROI, which means from the CEO of Intel, they are not, in 2026, almost 2027, they are not seeing the ROI. Their remarks highlight an emerging challenge for the AI industry, which has poured enormous sums into data centers, advanced chips, and power infrastructure in anticipation of surging demand for computing capacity. The warnings come as rising borrowing costs threatens to complicate financing for technology companies investing heavily in AI infrastructure. Higher bond yields could make it more expensive to fund data center construction and chip purchases, potentially putting pressure on the economics of projects that may take years to generate returns. Hock Tan said the industry has repeatedly encountered supply bottlenecks over the past two years, but expects some of those constraints to ease as production capacity expands. Quote, in the last two years, we have seen a series of bottlenecks that keep coming out, but then we overcome it. He said, memory shortage today might not be that way a year from now. He suggested that wafer shortages could ease by 2028 or 2029, while power availability could also improve as new infrastructure comes online. Despite the financing concerns, both executives were made bullish on near-term demand for AI computing infrastructure. Quote, there is more demand for compute infrastructure than we can supply. But again, and think about this for a second. So the actual customers, the actual end customers, right? The people that are going to buy the end product and then pay Anthropic, OpenAI, the vendors of the world, right? They literally are not seeing ROI. They're not seeing ROI. They don't understand where the ROI actually comes from. But on the other hand, there is more demand for compute infrastructure than we can supply. Isn't that a wee bit weird there? Intel's TAN similarly said the industry was unlikely to experience a significant slowdown over the next two to three years, citing growing adoption of AI applications and demand for computing power. But sustaining that growth beyond the next few years will depend on how quickly businesses adopt AI and whether the technology delivers meaningful economic benefits, the executive said. Whether the technology delivers meaningful economic benefits. [00:16:03] Speaker 2: Yeah. Like, isn't that the whole point? [00:16:09] Speaker 1: And that's what I find so weird with this whole AI fraud. Right? When they came out with print servers, I did not have to sit there for a fucking hour explaining to a CEO why a print server would be a fucking good idea. Hey, you know how right now, if you want any of your employees to print shit out, they have to have a printer connected directly to their computer? Hey, imagine if you could have one printer that was accessible from the entire network. And they went, ooh, that sounds good. Buy me one of those. Or if you're like, how about email? This is how you do email. This is websites. This is apps. Like, think about this. If you've been a technology professional for a long time, right, there is so many technology products that come down the pike. And you go to the CEO. And it's not a hard sales pitch. It's not a soft sales pitch. You just walk into the CEO's office. You plop down and you're like, okay, boss, here are the different projects that you can resource. Which one do you want me to work on, boss? And they're like, ooh, all of them. Like, can't do that, boss. Pick one, maybe two. Right? Because that's how the technology world is supposed to work. And this is what I honestly don't understand. Right? Again, being an IT professional for over 30 years at this point in time. If you talk with so many IT professionals, right, IT is still considered a cost center. Getting money out of executives can be an utter pain in the ass, even for things that need to be done. But there's this weird thing with artificial intelligence, right? Where just money is being thrown at artificial intelligence. But they have no idea why. They don't know what the ROI is. They don't know what the meaningful economic benefit is. They're just fucking throwing fucking money at it. And how long do you think that is going to go for? How long until these shareholders are going to get pissed off about all of this investment in technology that isn't doing a goddamn thing for the company? How long before, again, you know, the CFO starts looking at what's going on and is like, look, the technology stack is fine, but why are we spending this much money? I talked about that before where I had a buddy of mine talking about when the CTO, CTO, CIO, went to the CFO. And this was many years ago at this point in time because cloud has been around for a while. It's like 10, 10 plus years ago. Anyways, they needed a new exchange server, right? Literally, the CIO walked in the CFO's office and said, I need essentially $50,000 for a new exchange server, right? A couple of exchange servers, maintenance, whatever. Right. And he just went in there, didn't think much about it, so basically cut me a check. And the CFO looked at him and said, no. It's like, what? CFO said, yeah, we're going to go to Office 365. The CIO was like, what? Wait, what? You don't get to make that call, CFO. You, accounting person, me, techie person, you don't get to make that call. And the CFO was like, look, and basically laid it all out. Like when you actually purchase equipment, there's something called a depreciation schedule. Not only that, you actually have to pay taxes on the assets that you own. There's a whole bunch of stuff that goes into having your own exchange server. Whereas, again, from a tax standpoint, if you use Office 365 instead, there's actually a lot of tax benefits to doing that. And so basically, the CFO overrode the CTO on the infrastructure that they were going to use. That's the real world. So again, even with this stuff, even if you're these AI products that are actually doing some decent stuff for the company, when is the CFO just going to say, we're not going to fund that? Look, we can get 99% of the utility out of this product that costs 10% as much. We're going to be using that particular product. And I think this is what I find so weird. One of them, it's just all weird. Broadcom's TAN cautioned that demand for computing infrastructure could slow if the adoption of advanced AI models disappoints or improvements in their capabilities begin to plateau. I mean, just listen to all of the words being used here. They don't know about the ROI. They don't know about it delivering meaningful economic benefits. If the AI models disappoint, if there are not continued improvements. Like, none of this points to a technology stack that is obviously so economically valuable. Lip Boutan, meanwhile, emphasized that companies would increasingly need to demonstrate tangible returns from AI investments through improved efficiency and new business models. Yeah. Yeah. So basically, the issue with these big AI companies right now is they have not proven their value to their end customers. Their end customers are not willing to pay enough money to eat, simply not to pay the inference costs, much less pay enough money where there's a reasonable profit margin on any of this horseshit. But for some reason, instead of focusing on the business models of these companies, there's this idea, oh, it's capital. The thing keeping these companies back isn't their absolute lack of reasonable business model. It's their access to capital. Somehow, if we just hand them more cash, then it's going to make this business model make more sense. Look, if somebody just handed Little Caesars more cash to sell more chicken wings, then the chicken wing business would have been fine. I mean, you know, there would have been more employees eating more of the chicken wings that were purchased, and they would start losing more money on chicken wings. Anyways. Are you starting to understand why I'm frustrated with all of this? Again, AI's fine. The stack's fine. The stack's fine. It's these jackasses. It's these pieces of shit. These pieces of shit that are willing to destroy our society. They're willing to destroy our civilization. They're willing to bring the entire world economy down to its fucking knees just so they can get their couple ounces of blood money. And like I said with this, it's 2026. Look, these arguments, don't get me wrong, these arguments in 2022, like, oh, we don't have a meaningful economic impact. Oh, we don't know what the ROI is. Like, some of this stuff, right, if you go back to 2022, okay, fine. But again, like, think about this with any other technology revolution. Like, I think about this with the internet, right? Or the World Wide Web, really, right? So most of us, as far as we are concerned, the World Wide Web started with Windows 95. So again, you can think about this with artificial intelligence, right? AI has been around for a long fucking time. Even transformer-based model generative AI has been around for a decent amount of time, right? But here's the thing. So most people, they learn about artificial intelligence with the ChatGPT deployment. So what was that? That was 2022. So that was four years ago. That was four years ago. Now, what I want you to think about is correlate that to the World Wide Web revolution. So let's not just say the internet revolution, but the World Wide Web revolution, right? So Windows 95 came out in Windows 95. That gave people easy access to a web browser so that it was actually interactive. So I know for a lot of geeks out there, the World Wide Web, fuck off. Like, for most people, again, Windows 95 was basically like the ChatGPT moment. It brought the World Wide Web technology into common usage. You look at how different the world was from 1995 to 1999, that's four years, and how fundamentally, the world was changed. You didn't have to tell us about it being changed. You did not have to inform us about how powerful the technology was. It was fundamentally changed, right? You look at AI, ChatGPT, from 2022 to 2026, it's just not the same critter. Again, if you get into the coding world, if you get into some very specific aspects of things, it has done a lot of good. It's changed a lot of things. But it is simply not at the same level of the Internet or the World Wide Web. And that is the weird thing with all of this, is where they're just pushing this investment hyperspeed before any of it has been proven. And especially before the value proposition of this stuff has been proven, right? As I talked about before, right? You have Google. Google is putting LLMs directly into the Android operating system, putting them directly into the Chrome browser. If you have 16 gigs of RAM, you can use it directly on your laptop, and then you can go up to anything else. It can go up to their cloud services, right? Like right now, Microsoft. Microsoft has their new AI-powered computer coming out, and that's the thing. It has an NVIDIA GPU built into it, and so it does auto-switch. It does auto-routing, right? If it can solve the AI problem locally, it will do that first, and then if it can't, then it'll go up to their particular cloud. And that's one of the things to be thinking about with all of this stuff, is the whole question of, is the product that they're selling actually worth all this money? Again, you think about this with the internet. Like web browsers. You need web browsers. 2026, you can't do anything without a web browser, right? What web browser company is worth a trillion dollars? You look at Netscape, right? Netscape, you used to buy a copy of Netscape for like $40. So back in like 1995, 40 bucks. So it'd be like 80 bucks, $100 today in order to buy a web browser, right? And they were rocking, and they were rolling until Bill Gates did what Bill Gates does, and he just added Internet Explorer to Windows for free and killed their business model. And so that's the thing. Like when you think about a web browser now, what web browser have you spent a dollar on? Much less $40, much less $100 on. Even though it is integral technology that is required for the modern world, it doesn't mean that particular product actually has very much value to it. And so that is the bizarre thing with these AI companies. They have not proven their business models. Utterly unproven business models that literally burn cash like a fucking furnace, [00:27:03] Speaker 2: and they think that they are worth trillions of dollars. Anyways, what do you think about all this? [00:27:14] Speaker 1: Put your thoughts down below. Do remember, I am going to start doing the free hands-on technology education classes, hopefully in Baltimore, Maryland. Coming up at some point, don't quite know when, worms are turning. The worms are turning. But if you're interested, there is a link to the meetup group down below. You can become a member of the meetup group and come to the classes for free. If a meetup asks you for money, don't give them any money. I already gave them money. They're just being stupid. So anyways, that is down there. If you're interested, do remember, if you like these episodes, you want them on Spotify or on Apple Podcasts. Link is down below. If you want them on LinkedIn, if you want to follow me on LinkedIn, there's a link down there too. With that, see you all later.