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We have Michael Bur. We have Steve Eisman. If people start to pull money from open AI and they couldn't raise the money, that would be a cascading effect in terms of the entire exactly what I think is going to happen. I think they're going to be viewed as the wei work of AI. The government will pull out all the stops to save the AI bubble, to save the market, to save the economy.
The problem is too big to save. Who's most at risk when the narrative flips around AI? Well, that's easy. This is Elliot from the Early Stage Investor. On this channel, we try to make lifechanging returns investing, whether to the bull side or to the bare side. In this video, we're going to be talking about the bare side.
You really have to be a contrarian to make life-changing returns. So, one of the biggest contrarian bets on the planet right now is calling for a crash to the AI bubble. A lot of very smart investors are starting to move in that direction. So, in this video, we're going to talk about how to potentially get rich investing in a collapse of the AI bubble.
We're going to dive into every dimension of it. Really important, really deep, really heavy stuff. And a lot of it lines up with the financial market price action I was kind of talking about in last week's video about what comes next for financial markets. Generally, there's a liquidity problem. there's some sort of break in the financial system.
There's some sort of rise in interest rates that pops bubbles. And so that's kind of what we went through in last week's video. Like we're ripe for a 2020 style correction. Maybe not pandemic level, but because of what liquidity is doing, because of what interest rates are doing, it seems like we're heading for what could be a perfect storm.
Dan Niles, this came out after my video last week. It actually aligns very well with what I can see happening in 2026. Here is Dan Niles actually summarizing what we can probably expect in 2026. You're starting the year with easy money. And what I mean by that is the Fed in December switched from selling bonds to then they started buying 40 billion a month in short-term treasuries.
So call it QE light. In May, you're going to get a new Fed president who's only going to be appointed by President Trump if he wants to cut rates by at least another 100 bips. So, that'll keep the easy money going. And then you've got the tax benefits of the big beautiful bill hitting in Q1 where consumers are going to get 100 to 150 billion extra in tax refunds.
And so, I think you're going to see the year start off strong. It already has. The Russell 2000 is already up 8% for the year, which is pretty incredible. But I think as you get towards the end of the year, things are going to get a lot more choppy and with multiples sitting up at 25 times trailing for the S&P 500, which is very high relative to where inflation levels are and by other measures even like enterprise value to sales even higher than the peak in 2000 and the potential for the AI trade to get more discerning which we've already seen at the end of last year.
I think it you could have a pretty big draw down towards the end of the year. So that analysis does align very well with what I could see happening like a blowoff top followed by a massive black swan flash crash. So the question is can AI stocks the frothiest of frothy AI stocks could they weather a potential draw down?
Because if not the whole house of cards could fall. Of course AI is revolutionary. Of course, there's booming fundamentals behind it, but just like every bubble, you could get a pop in. And so, as I talked about in my last video, we're seeing a broadening out, right? Here's the Russell 2000, small cap stocks breaking out for the first time in literally 5 years.
This chart goes back to 2022. It hasn't moved in 5 years until now, right? So, we're breaking out. That is bullish for crypto. Money is just moving out the risk curve. We're starting from almost risk-free big tech down into riskier small cap. So, we're seeing a broadening out. So, that aligns with what we were talking about, but what are some of the assets that could potentially cause problems for the AI trade?
Corewave raises $25 billion of capital. Is it fuel for growth or is it leverage trouble? What core does is similar to Herz rental car. They borrow a lot of money like they're just showing you, raising tens of billions of dollars. What they do with that money is go and buy Nvidia chips. Then they rent out usage of those chips to Microsoft to OpenAI.
But the issue with that business is you're raising a lot of money, but you're buying something that's depreciating rapidly. Imagine if I were to buy up a bunch of computers and let people use them hardcore for four years or 5 years. What would be left over at the end of those 5 years? You would have worthless computers, right?
Computers depreciate quickly. The rental car business is tough because you're buying these cars, you're renting them out, people just run them into the ground and what are you left over with? Well, you might need to raise more money to go buy more chips and to rent those out again. So, it's a very dangerous mission.
Right now, if you were borrowing money to go buy prime coastal real estate, what would you have left over after you rented it? You would have prime coastal real estate. The land doesn't depreciate. So, if you're buying assets that don't depreciate, you do incredibly well. Unfortunately, they're borrowing money.
They just keep on taking on debt. Their expenses are rising. The issue is they don't own the land or the building or anything except for really the chips. So, they're borrowing money, they're buying the chips, they're renting the building, they're renting the utility, they're renting everything. Microsoft is just renting it from them, right?
Not taking on any of the real risk. So, that's a tough business. And like I've been talking about, we're getting a broadening in assets. So year to date, Core Wee is up pretty massively. And so the question is, will assets like Cororee start to crash and roll over? That's what we're going to try to answer in this video.
Oracle's collapsing stock shows the AI boom is running into two hard limits, physics and debt markets. We're just seeing a glimpse of this. Oracle is a multiund billion dollar asset. Look at its chart over the last month. Just down, right? It's just acting like an absolute dog. And I would say that's a massive red flag for the AI trade.
Open AI, which owns ChatgPT, committed hundreds of billions of dollars to Oracle to build them supercomputers. It really doesn't sound more bullish than that on paper, but the market is seeing straight through. They haven't seen through Core Weeves issues yet. They're just focusing on oracles. And so, they're already starting to crash in assets.
How can a narrative really do well when the biggest AI platform on the planet, Chat GPT, giving hundreds of billions of dollars to Oracle, isn't seen as bullish, right? So that's kind of a canary in the coal mine. And so again, some of the smartest money and investors on the planet are starting to see writing on the wall.
Who are some of the shrewdest smartest investors? The people that nailed the real estate bubble. We have Michael Bur. We have Steve Eisman. We're going to dive into what both of those people think. Here is what Michael Bur thinks about the AI bubble. He shared this post on X. OpenAI is falling apart in real time.
I've watched companies implode for decades. This one has all the warning signs. OpenAI declared code red in December. Albin sent an internal memo telling employees to drop everything because Google's Gemini 3 is eating their lunch. Salesforce CEO Mark Beni off publicly ditched ChatGBT for Gemini after using it for 2 hours.
So assets associated with ChatGpt are kind of viewed as toxic waste. That's why Oracle is crashing. Catch GPT traffic fell in November, second month overmonth decline of 2025. Meanwhile, Gemini jumped to 650 million monthly active users. The company that was supposed to build AGI can't keep its chatbot competitive.
But the real story is the money. OpenAI lost 12 billion in a single quarter according to Microsoft's own fiscal disclosures. Deutsche Bank estimates 143 billion in cumulative negative cash flow before the company turns profitable. Their analysts put it bluntly. No startup in history has operated with losses on anything approaching this scale.
They're burning $15 million per day on Sora alone, $5 billion annually to generate copyright infringing memes. Even Sora's lead engineer admitted the economics are currently completely unsustainable. Here's the big math problem nobody wants to discuss. It's going to cost 5x the energy and money to make these models 2x better.
The lowhanging fruit is gone. Every incremental improvement now requires exponentially more compute, more data centers, more power. Reports suggest OpenAI's large training runs in 2025 failed to produce models better than previous versions. OpenAI had to restore GPT40 within 24 hours because users prefer the old model.
And now Elon Musk is suing OpenAI for up to $134 billion. Opening II called a harassment, but the judge disagrees. Here's what I think happens next. The AI hype cycle is peaking. The diminishing returns are becoming impossible to hide. Competitors are catching up. The lawsuits are piling up. OBI needs to generate $200 billion in annual revenue by 2030 to justify their projections.
That's 15x growth in 5 years while costs keep exploding. Even Sam Alman admitted investors are overexited about AI. His exact words, someone is going to lose a phenomenal amount of money. If I were running an AI startup with good traction right now, I'd be looking for an exit, selling to the hype before the music stops.
Very important. The market is all about narrative, right? We're already seeing Oracle crash. A high quality company like Oracle crashing. So, here's Michael Bur of the big short who shorted the housing bubble into oblivion. This is how he responded. This is not surprising. It will not end with OpenAI.
All the capital being spent and lent by the richest companies on Earth will not buy enough time. The government will pull out all the stops to save the AI bubble, to save the market, to save the economy. The problem is too big to save. Again, by that very same definition. So again, I'm expecting a massive black swan crash in 2026.
Very unlikely the lowquality AI stocks would be able to recover from that. Now, yes, Google, which is clearly crushing it right now, probably will recover. But will the core of the world, which are going to need to raise another hundred billion dollars to go buy the newest Nvidia GPU and rent it to OpenAI, will they survive?
It's not clear. here. But generally what happens in bubbles is the all the assets go up together, then the air comes out of the bubble, all the assets crash, and the best ones make it out. But that kind of summarizes the narrative. Massive losses in these assets. Who's most at risk when the narrative flips around AI?
Well, that's easy. That's open AI. I mean, for one simple reason, 75% of their revenues come from consumer. And there's 5 billion consumers daily that have been trained by Google that you get answers for free. So, it's going to be very hard for them to get consumers to pay for this, especially when Google has shown with Gemini [clears throat] that they're doing a really good job of delivering a topranked model.
They have the monetization engine with search. They've got the end consumer products through Android and their own Google Pixel phones as well. And then they have Google Cloud also to help monetize that infrastructure spend that they have. And so they really have all of that plus they've got an incredible cash flow machine to fund all of this.
I think Open AI, I'm not saying it's not a fantastic company. It obviously started the AI revolution. I just think Google's an even better company and it's going to be very tough for them to compete against Google and I think that's what you've really seen since the peak in October. So that's his argument on why OpenAI will struggle against Google.
Again, these are very scary narratives for assets linked to Open AI. Obviously, OpenAI has hundreds of millions of users, but again, if we get a down market for whatever reason, it's going to be the ones that have the worst narrative that get dinged the most. So, we heard from Michael Bur of the Big Short.
Let's hear from Steve Eisman of the Big Short. You have said that these models are reaching diminishing returns. These companies, these hyperscalers, Microsoft, they've been buying, you know, GPU chips like they've been going out of style. And you know the amount of money that all these hyperscalers spent in two 2025 just the pure hyperscalers was probably something like $500 billion.
The amount of GPUs people will buy would have to slow dramatically as people took a step back and figure okay what do we do now? I mean a lot of people have seen the writing on the wall for a while. Sam Alman basically kept hinting that GPT5 was going to be artificial general intelligence or close to it.
And people were for years talking about when is GPT5 gonna drop and he's like it can do anything a PhD can do. But they released it to the public and it took the public like an hour to realize this wasn't true. That it was still making these hallucinations and stupid problems. Same problems, you know, fewer of them.
Like it was it was legit better but not so much better. you know, Google is catching up because everybody's doing mostly the same thing. There's no moat here. There's no technical mode, right? All I think what you are you and some other people have argued is that if if all you're doing is constantly scaling an LLM, the winner is the person who can afford to scale the LLM.
And who who can afford more than Google? Nobody. That you're going to have a pileup near the top and that you're going to have a price war. Um, as these things became commodities, prices would drop. And in fact prices have dropped by 100 a factor of 100 um and how much you pay for a token. So we have had that price where I think it is also true that in the end that favors Google and so that means you're going to have a convergence at the top.
It's a commodity at the top where everybody's going to make models that are a little bit better than last year's but not that much better. And so it's not going to matter anymore. And what is what has that meant? It's meant Google has caught up and it's meant that China has caught up and meant that Anthropic has caught up and so that has also driven as you say it's a commodity that has driven the prices down.
Um, which is good for the end consumer but not good for the business model where I'm going to pay you a ton of money for GPUs because I'm going to make a ton of money. A lot of money has been squandered. You know, the VCs got their 2% cut. The limited partners are going to lose a lot of money in the end, I think.
Do you think we're close to that happening or it's impossible to tell? I mean, you know the saying as well as I do about shorting, right? The market can remain irrational longer than you can remain solvent. Correct. But the metaphor that I was using last year was wy coyote at the end of a cliff, right?
In in Bugs Bunny, right? He doesn't fall down until he looks down. I think that people have started to look down in your world in the investment community. People are I think this really began in November starting to say, "Hey, I see all this circular financing. The results on return on investment are not that great.
Maybe this doesn't make sense." But like there's another study that was just reported in the Washington Post a couple days ago was done a month earlier showing that only 2 and a half% of the jobs that people do with the AI systems actually able to do. You know, so most things that people are fantasizing that AI is going to do for them,
they don't do. They don't really do. And that means at the end of the day that all these investments in chips don't make sense. It means at some point like I think Open AI is probably the most vulnerable company here. Open AAI has, you know, trillion plus dollars in outstanding commitments, has never made a profit.
There's now in a commodity market. Their biggest competitor Google caught up. And not only they caught up, but yesterday got the Apple deal, which is a really big deal that you know, and so like I think that they're flailing. I don't see how they're going to warrant their valuation. If Open AI, if people started to pull money from Open AI and they couldn't raise money, that would be a cascading effect in terms of the entire
exactly what I think is going to happen. I think in the end, Open AI maybe gets absorbed by Microsoft or something like that. I've been saying for a couple years I think they're going to be viewed as the wei work of AI and people are going to be like how did they get valued at that like it just didn't make sense.
They're losing whatever it is, $3 billion a month. That's, you know, 30 some billion dollars a year, something like that, right? And they just got a $40 billion funding round. That gives them like a year's runway, but that's it. And a lot of people are probably standing on the sidelines saying, "Hey, wait.
Google's better suited to play this game. They actually caught up. If it's only scale than Google, if it's only scale, Google wins. Hands down. How could they not? Google can make the commitments. Google doesn't even need Nvidia in it because they making their own tensor pro processor units that do kind of the same work and it doesn't take that many people to think that openai [clears throat] is in a position where the check size that they need to stay afloat is just massive not many people can write you a hundred billion dollar check you know five people in the world maybe can do that and if four of them say no you're okay but the minute five of them say no you're out of business or you're going to Microsoft saying what can you give us?
So the wei work of AI that's what he's calling open AI very few people can see bubbles crash before it happens these guys are talking about it Steve Eisman Michael Bur they know how to short markets Steve Eisman might not be cra might not be shorting it yet he's been very bullish on Microsoft and some of the hyperscalers but it seems like the writing is on the wall and all we need is some sort of shock event in the macro space.
Here's the 10-year Treasury yield spiking. Here's the Japanese Treasury yield spiking. All we need is some air, some liquidity to come out of the system, and that pops anything even slightly vulnerable. And we're already hearing whispers about how OpenAI is massively vulnerable. So, the way to get rich by taking advantage of a potential massive crash in AI is to not chase anything.
I think we do get some sort of blowoff top bullish activity, bullish movement that suckers in a lot of retail right before this thing pops. So, just don't chase anything. Raise cash. Invest accordingly. Buy the highest quality assets on the planet. We're going to have to stay on top of this space. Thank you for watching.
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