Outside the Cloud Czars, most of the companies leading the AI boom are privately held.
OpenAI, Anthropic, Perplexity, and dozens of other firms are raising billions, spending billions, supposedly bringing in billions, but not telling anyone what is going on under the hood.
This means that when they do say something, it may not be true. OpenAI said it was bringing in $12 billion/year on July 30, then two days later claimed it was bringing in $13 billion/year.
Which is it, dude?
OpenAI raised $8.5 billion at an assumed value of $300 billion in July and now claims it’s raising cash based on a $500 billion valuation. It says it will raise $40 billion in cash this year.
How much of this is real, and how much is fake?
Ed Zitron reported yesterday on Cursor, a key supplier of “vibe coding” services, questioning whether the business is sustainable. If Cursor were public, we could find out. As it is, we can’t.
This is why companies go public.
Now, all of a sudden, the Administration says you can put private equity and crypto assets in your 401(k). A lot of people are going to do this. A lot of people are going to lose their shirts, because private equity isn’t subject to audit, and cryptocurrency is based on nothing but math, often not even that.
Shit’s About to Get Real
Of course, the crash can jump from private to public equity faster than you can ask Alexa for your notifications.
Cloud Czars are all building huge data centers as fast as they possibly can based on enormous demand from these privately held companies. If the private equity numbers are built on sand, the Cloud Czars’ numbers are built on sand. And they’re the whole market right now.
Look at the latest earnings announcements. Google, Microsoft, Meta, and Amazon shares all rose after reporting record cloud revenues, created by AI. But what if those sales aren’t real? What if they’re like Microsoft’s own “investment” in OpenAI , mainly credits for computer use on which some enormous value is imputed?
Companies go public so auditors will test their numbers and keep public investors as safe as possible. We need to rely on what’s reported before throwing hard-earned money at something. All these protections against risk are being tossed overboard in the AI boom, and for what?
You haven’t seen this before, and I haven’t seen this before, but history sure has seen this before. It’s the hallmark of every financial panic before 1932. Before modern financial regulation, our markets crashed regularly, taking everyone’s savings with them. The 1929 crash was just the last and most decisive example, but the U.S. government nearly went broke after the 1893 Panic, and again in 1907, before the Federal Reserve was created.
Are we going to have to go through all that again, only on a global scale?
