The Lehman Brothers of the AI Bubble is Coming, Says This Critic Warning of a Fallout for Tech and the Entire Market

Dow Jones
07/16

Ed Zitron sees a downfall driven by loss-making subscriptions and an insatiable need for cash

In Sam we trust? OpenAI could turn into a Lehmans moment for artificial intelligence, argues AI skeptic Ed Zitron.

Blowout results from chip giant Taiwan Semiconductor Manufacturing Corp., or TSMC, seem to be doing little for sentiment on Thursday.

Worries about whether spending on artificial intelligence will pay off has been a downer for some stocks lately. Our call of the day from Ed Zitron, author of "The Hater's Guide To The AI Bubble," won't help much.

In a 15,000-word Substack post on Wednesday, Zitron, also founder of a technology-focused public-relations firm, wrote it's not if, but when, OpenAI will collapse.

"Its failure would be a watershed moment - the Lehman Brothers of the AI bubble, and an event that would define the end of one epoch, the start of another, and that would shake the afflicted out of that psychosis," he said.

A dogged AI critic, Zitron sees a "cultlike psychosis" around what he sees as an AI bubble, only kept alive by OpenAI's existence.

Back in early 2023, when Zitron said he started researching large language models, he called generative AI "the latest gold rush in technology." He predicted two years ago that OpenAI's Sora video generator was not viable - it was canned in March.

His new post attacks OpenAI's business model and plans to "burn over $852 billion by the end of 2030," along with the $50 billion or more in spending on compute this year. The latter, he estimates, is "more than 50% of all global compute spend."

While OpenAI and Anthropic raised $300 billion in the past few years, their infrastructure costs have been funded largely by hyperscalers, who have been creating an illusion that more companies will eat up compute like OpenAI.

Oracle $(ORCL)$, he notes, is in particular danger from an OpenAI collapse, as it could get stuck with "billions of wasted capex, and endless debt and leases."

Zitron predicts that OpenAI's collapse will only come after "AI data center debt and venture capital funding has been almost entirely exhausted." That's as OpenAI has vast money needs. "Based on my own reporting on its audited financials from 2024 and 2025, OpenAI will need to raise funding at least three more times in the next decade," he said.

Its downfall will be driven by loss-making subscriptions, weak advertising revenue and massive costs for customers, Zitron said. That will curb compute demand, end free ChatGPT and make investors wary of any AI startup, not to mention seizing up related data-center debt.

Zitron doesn't think Anthropic is safe either, burning billions on training models, doing way too many Claude iterations and lacking focus.

An OpenAI collapse will lead to a "violent, punishing effect on the entire stock market," he said. The scale of that "scare me to the point I'm almost hoping I'm wrong."

In fairness, not everyone is quite as worried. The legendary investor Howard Marks, co-founder and co-chairman of Oaktree Capital Management, discussed in a podcast that aired on Wednesday how he changed his mind from thinking AI was a possible bubble to being more impressed by the technology.

In a My First Million podcast episode, Marks explained his shift: "I upgraded my opinion of AI and its potential because of its ability to talk about its own strengths and weaknesses, to use humor, to put information in the context of me, to use what it knows about me. And this is really exceptional stuff."

Marks referred to several qualities of AI that are "unprecedented." Looking across technological innovations like railroads and the internet, he said there's never been one that has had AI's "quality of autonomy."

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are mixed, and oil (CL.1) (BRN00) is set for its first drop in four sessions.

 
Key asset performance                                                Last       5d      1m      YTD     1y 
S&P 500                                                              7572.4     1.20%   2.05%   10.62%  20.89% 
Nasdaq Composite                                                     26,269.23  1.54%   0.95%   13.02%  26.72% 
10-year Treasury                                                     4.578      2.00    11.80   40.60   12.10 
Gold                                                                 4041.2     -2.21%  -4.42%  -6.72%  20.80% 
Oil                                                                  79.5       10.71%  5.27%   38.48%  19.89% 
Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

TSMC (TW:2330) $(TSM)$ reported blowout results.

Retail sales for June, weekly jobless claims and the Philadelphia Federal Reserve bank's manufacturing survey are due at 8:30 a.m. Eastern. Pending home sales are due at 10 a.m. Dallas Fed President Lorie Logan speaks at 12:30 p.m., with Fed Reserve Vice-Chair Philip Jefferson speaking in the evening.

UnitedHealth $(UNH)$ posted a massive beat-and-raise quarter and shares are climbing, with GE Aerospace $(GE)$ delivering similar news .

The U.S. reportedly fired on an oil tanker in the Strait of Hormuz, with Iran exchanging attacks for a fifth day.

Netflix $(NFLX)$ will report after the close, and analysts are forecasting record revenue as worries about declining viewers fester.

The hunt for the counterfeiter trying to make the perfect bill.

The chart

The chart from TSMC's second-quarter earnings report shows how demand for high-performance computing (HPC), used to help run complex simulations and train large language models, is its biggest driver of revenue growth. The chip maker reported a 77% boost in profit to a record high $22 billion.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

 
Ticker  Security name 
TSM     Taiwan Semiconductor Manufacturing Corp. 
NVDA    Nvidia 
MU      Micron 
SPCX    SpaceX 
TSLA    Tesla 
MSFT    Microsoft 
AAPL    Apple 
AMD     Advanced Micro Devices 
META    Meta 
SNDK    Sandisk 

-Barbara Kollmeyer

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(END) Dow Jones Newswires

July 16, 2026 07:11 ET (11:11 GMT)

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