The AI Bubble Is Cracking (Starting With Data Centers)

John Johnston (0:00)

I mean, Sam Altman, a couple of weeks ago now, said that they're about to invent a genie that's going to grant any wish. I mean, hello, that's a big red flag as far as I'm concerned. But if you look into the financing, which is really what burst bubbles, things are starting to show.

Hi everyone, JJ here. Welcome back to the lounge. Well, I haven't made a video about the AI bubble as I see it for about a month, almost exactly a month. That's not because I've forgotten about it or I don't think there is one suddenly. So these things take time and I'm not going to follow every little bit of news. But something popped up which I think is worthy of reporting on. The bubble has been stewing in its own juices, so to speak, as I see it. And this news I think is pretty significant. And there are other things too. Oracle sends force majeure notice about Data Center Projects stock drops 3%.

Well, that stock is Oracle, of course, and it has dropped way more than that. Look at this. From the peak, way back in 19th September 2025, it's actually down over 50%, 55%.

So the market is not oblivious to what's going on with Oracle in general. But what does this mean? I want to go to ProfG Markets because they do follow it every day. And Ed Elson explains it pretty well here and they have a little discussion about it. And so they know it's significant. The market knows it's significant. The title of this video is Cracks are Showing in the Data Center. Boom. Yes, I think they are. And of course, Ed Zitron, who talks about it all the time at great length in his newsletter on videos on interviews says, hyperscalers are hiding a massive secret about uninstalled GPUs. So that's about the Overbuild. And he has this one, this is in his own podcast Better Offline monologue, he says, the AI Data Center Overbuild. I'm not going to play from that one. He doesn't like people clipping from his podcasts at all. So I won't do that. But this is well, Steve Eisman of big short fame. So a lot of people will remember Michael Burry. He's in the news all the time. He writes a sub stack. Now, Steve Eisman has a podcast. He's a lot more measured and he's been unwilling to really say that the bubble is kicking in or that there is a bubble.

But this is something that he flags that he is of pretty great concern to him. The Enron era tricks are back in AI.

How these companies are hiding their debt.

So that is a big red flag when Enron is mentioned. He talks about special purpose vehicles that Enron used, off balance sheet financing. He goes into in detail. He doesn't like people clipping from his video. So I'm going to link to all of these, by the way, in the description. And if you're interested in this stuff, how it's playing out and how these people think in different ways, how it's playing out, and there are different levels, different aspects to it. But obviously it is getting pretty serious. I think it's starting to show. Wall Street is seeing it. Other people are seeing it. And this here, Enron, the smartest guys in the room, which is an Alex Gibney documentary. He's doing the one that I've been talking about, done many videos at this point on the Musk documentary that's coming out 9th of October. But this is one of his previous ones and I rewatched it. It's from 2005 and it does go into this financing in a very entertaining way. So I would encourage people to see this. They talk about some of the shenanigans that went on there from Enron and these special purpose vehicles.

And they were really playing games with it. One of the names involved in that was a fake name and it was M.Yass and they were trying to work out when they went through it, what that meant. And it was My Ass. You know, they were really playing games there. Of course, there was fraud involved and people went to prison and worse. And so Steve Eisman flagging this kind of shenanigans is a pretty worrying sign. And there's also here Patrick Boyle who says, Anthropic just filed to go public. Does the math add up? Well, no, it doesn't to get a long story short, but I do recommend that video as well. He goes through it. So we've got OpenAI and Anthropic whose finances look pretty dodgy.

OpenAI seems to have put off its IPO. I mean, Ed Zitron leaked the finances or was leaked to him, and he talked about that a while ago. I've made videos about that and now Anthropic. Some of the financial details are coming out, and they're looking at a $2 trillion IPO. SpaceX, of course, involved in AI as well, and that was a massive valuation, and so they were first to market. So it's getting pretty interesting what is going on in this space. But let's get right back to Ed Elson here talking about what's happening with these Oracle shenanigans in the data centers. I think they explain it pretty well here.