Ricardo

Google just burned $9 billion in a single quarter, and the plan to pay for it runs through people's Gmail. Google's AI is answering more questions than ever and making less money on each one. I only see one way to close that gap, and it's knowing a lot more about the person asking. Sundar Pichai says search queries are growing at the fastest rate in 5 years. But search revenue was $63.35 billion this quarter, against $63.27 billion the quarter before. People are searching more than ever, and Google is barely making more from it. Search growth has gone from 19% to 17% to 12% this year, and Google named lower monetization inside AI Mode as one of the reasons. Meanwhile the bills keep piling up: - Google spent $51.4 billion on capex in the quarter, more than double a year ago. - Free cash flow came in at minus $9.07 billion, after minus $5.86 billion in the second quarter. - Before this year, Google had never posted a negative free cash flow quarter in 22 years as a public company. - Through 9 months, it's at minus $4.8 billion. At the same point last year, it was plus $48.7 billion. So Google's answer is more ads inside the AI. Philipp Schindler, its business chief, said Google is scaling ads in AI Overviews and AI Mode to more users and queries, and taking AI Mode ads global for the first time. But here's what matters: On October 16, Google rewrote a privacy promise it had kept since 2021. The policy used to say Google doesn't personalize ads based on Gmail, Drive, or Photos. Now that sentence ends with an exception for anyone who makes that data available to other Google services that support personalized ads. That covers everyone who connects Gmail or Photos to Google's AI. Google's help page says ads won't be based directly on the inbox, but the AI can pull summaries, excerpts, and inferences from it, and that same information can be used to show ads. And Google is now testing ads for exactly those users, after saying in March they didn't see any. AI Mode questions are about 3 times longer than normal searches. People tell an AI far more than they ever typed into a search box. So the product that earns Google less per question is also the one that learns the most about the person asking. Google stopped scanning Gmail for ads in 2017 to win over business customers. 9 years later, its AI found a way back in. The other side has a real case: Google Cloud more than doubled to $30.7 billion with a 36% margin, and plenty of investors think that pays for everything. Personal Intelligence is opt-in, advertisers never see anyone's email, and Google says it excludes sensitive categories like health from ad targeting. But the people who connected Gmail signed up for an assistant, and the policy describes no separate consent for ads. If Google wants to keep that trust, it should do 3 things: It should ask separately before anything from Gmail or Photos touches an ad. It should delete what the AI took from an inbox when someone disconnects it, because right now disconnecting doesn't delete data Google already holds. And it should report how much ad revenue comes from AI Mode, so investors can see whether the AI is paying for itself. Google spent 9 years telling people their inbox was off-limits for ads, and its AI just made it fair game again.

Elon Musk now literally holds the off switch on Anthropic's $2 trillion IPO. Anthropic's filing shows it has agreed to pay Elon's AI company up to $120.5 billion for computing power. And starting early next year, either side can walk away with 90 days' notice. The deal is with SpaceXAI, the SpaceX unit that used to be xAI, and it rents Anthropic the Nvidia chips that run Claude. In May, the price was $1.25 billion a month for one data center in Memphis. Reuters reported the confidential draft of this filing put the total at $84.5 billion. The public version filed today says $120.5 billion. Once all the capacity arrives in December, the bill jumps: Anthropic expects to pay Musk about $3.1 billion every month. Anthropic reportedly brought in $16.8 billion last quarter, which works out to about $5.6 billion a month. So more than HALF of what Anthropic earns today is about to go to one supplier. Now here's where it gets really insane: The lock-in on those contracts ends in January and March 2027. After that, either side can cancel with 90 days' notice. Fortune reported in July that the clause gives SpaceX a way to take its chips back if Grok suddenly needs more. Grok competes directly with Claude. And in February, Elon publicly called Anthropic's AI evil. So the company selling itself to the public as the safe AI lab is about to run a huge share of its product on hardware owned by its loudest critic. That critic also owns a direct competitor, and he can start the 90-day clock in early 2027. The filing does warn that some of Anthropic's compute suppliers build their own AI models, and that warning reads very differently once the supplier is Elon. And Elon needs this deal just as badly: SpaceX's CFO has promised $100 billion in annual revenue by the end of this year. At full speed, Anthropic's rent comes to about $9.3 billion a quarter. That's more than the roughly $7.6 billion SpaceX's entire AI business brought in last quarter. So 2 of the biggest IPOs in history are now holding each other up, and both of them have a 90-day exit. Anthropic has a real argument here. Computing power is the scarcest thing in AI right now, and Amazon's cloud capacity for 2027 is reportedly largely sold out. The filing even admits Anthropic badly underestimated how much compute it needed in the past. Grabbing every chip on the market is the rational move, and the same clause lets Anthropic leave if cheaper capacity shows up. But public buyers deserve 2 things before the listing: Anthropic should publish how much of Claude runs on SpaceX hardware and what happens to its customers if that notice ever arrives. And it should get the 90-day exit removed for the full length of the contract, the same way its other big compute bills are locked in. Until then, anyone buying ANT at $2 trillion has to answer one question for themselves: Who do they trust to keep Claude running in 2027, Anthropic or Elon Musk?

The United States military now needs Elon Musk's PERMISSION to go to space. SpaceX turned down three Space Force missions, and not one other rocket company offered to take them. 12 years ago, SpaceX sued the government to break a launch monopoly. Now SpaceX is the monopoly, and this week showed what that means: In April 2014, SpaceX went to court because the Air Force had handed United Launch Alliance a sole-source block buy of 36 rocket cores for national security launches. Elon's argument was simple: Military launches should be competed, and if SpaceX competed and lost, that was fine. ULA was flying on Russian-made engines at the time, and Elon made sure everyone knew it. Today, the board looks like this: SpaceX flew 85% of American launches in 2025. ULA's Vulcan was grounded this year after booster problems. Blue Origin's New Glenn exploded on its only Florida launch pad in May and is likely out until next year. Launch capacity is now the binding constraint for the whole industry, and Seraphim doesn't expect relief before 2029. Federal law tells the Pentagon to sustain at least two launch vehicles that can deliver any national security payload. For these three missions, the number of companies willing to fly them was zero. And then there's SpaceX's own AI business: It brought in $7.5 billion of the company's $14.6 billion in revenue last quarter, and SpaceX's 2027 Starship flights are focused on Starlink V3 and prototype data centers. SpaceX is also phasing out Falcon 9, and many military satellites don't fit on Starship. So the scarcest thing in space, a ride to orbit, now belongs to a company with its own AI satellites to launch. And the same man is reportedly being brought onto a Pentagon commission on the future of warfare, which nine current and former officials told Politico raises conflict-of-interest concerns. But Elon didn't break any rule here. A private company is allowed to turn down a customer, and that's the whole problem. Washington let national security depend on a company that's free to say no. SpaceX earned this position by being cheaper and better than everyone else, and the failures at ULA and Blue Origin aren't Elon's fault. A Space Force general also says the gaps are temporary and the military is working through them. But if launch is now national-security infrastructure, it should be treated that way: Any company holding most of the launch capacity should have to reserve a share of it for national security missions. The Pentagon should pay to keep a second provider flying even when it costs more, because that's what the law already demands. And no launch provider should help write the Pentagon's plans for the future of war. SpaceX won the fight it started in 2014, and the prize turned out to be the Pentagon's dependence.

Abu Dhabi is paying OpenAI to pay Abu Dhabi. The UAE is leading a $30 billion round, and the money could come right back through a computing deal OpenAI is negotiating in the UAE. We've seen these loops before, and so has the IMF. Earlier this month it counted 14 deals since 2023 where investors poured about $950 billion of equity and debt into AI companies and got $1.4 trillion of future revenue promised back to them. It called that wrong-way risk, because the investment and the revenue tied to it collapse at the same moment. The circle works like this: UAE-backed funds put billions into OpenAI. OpenAI is negotiating to buy more computing power in the UAE. The UAE keeps the OpenAI stake and could earn its money back as compute revenue, while OpenAI gets a headline-sized funding round. Both sides can report growth, and the same dollars have only made a round trip. And the price is already sliding: About a month ago, OpenAI was reportedly asking for $30 billion at $1.4 trillion. Now the number is $1.25 trillion, $150 billion lower, and OpenAI reportedly wants the commitments signed by the end of next week. That's 25x the $50 billion annualized revenue it told investors it had at the end of September, for a company planning around $600 billion of computing spend by 2030. And the loudest warning about this deal literally came from Sam Altman HIMSELF... In August 2025 he told reporters that investors were overexcited about AI, called the valuations insane, and said someone was going to get burned. In 2023, at an event in Abu Dhabi of all places, he said OpenAI shouldn't go public because a company building superintelligence would make decisions that public-market investors would find very strange. OpenAI filed confidential IPO paperwork in June, and this round is being framed as the bridge to get there. So who is this bridge for? The UAE gets in below the price OpenAI wanted a month ago, with a computing contract on the side. OpenAI gets cash to keep spending until the listing. And the public gets the stock after the IPO, at whatever price the bankers set, once the investors with the best terms are already in. Before OpenAI lists, the filing should answer one question: How much of the money raised from each investor comes back to that investor as contracts? Every dollar that makes a round trip should be disclosed right next to the revenue it props up. If the money ends up back where it started, the only new money in the deal is the public's.

The AI bond market is pricing a crash at the exact moment Wall Street is lining up the biggest IPOs in history. The last time credit and stocks disagreed this badly, the credit market was right three months early. I spent the week watching both sides of the AI trade, and they're telling two completely different stories... CoreWeave rents AI computing power to Meta, OpenAI, and Microsoft. On Thursday, the cost of insuring its debt against default hit a record that implies more than a 60% chance it defaults within five years. Its bonds due 2031 fell to about 82 cents on the dollar, a yield of roughly 15%. Two months ago that yield was about 12%. Allianz's chief investment officer told the Financial Times that data-center bonds have reached the stage where only the strongest borrowers survive. Goldman Sachs says hedge funds dumped AI stocks this week at the second-fastest pace in more than a year. And last week, an Nvidia-backed data-center company called Firmus pulled its IPO after investors refused to pay its price. Meanwhile, here's who's being asked to buy: SpaceX raised about $86 billion in its IPO in June. Anthropic is lining up a listing in November that could raise up to $100 billion at around $2 trillion, which would make it the largest IPO ever. OpenAI is trying to raise $30 billion at a $1.4 trillion valuation. And the IMF says single stocks now make up 28% of the geared ETFs that retail traders use to magnify their bets, up from 16%. So the people who only get paid if the money comes back are pulling AWAY, and the biggest share sales in history are being lined up for pension funds, index funds, and everyday traders. You should trust the lenders more in this fight, and the reason is simple: A stock buyer can wait years for a story to come true. A lender needs the cash to show up on a schedule, so lenders spend their days checking whether it will. When they start demanding 15%, they're saying what they found. In June 2007, Bear Stearns pledged up to $3.2 billion to prop up one of its subprime hedge funds, and by mid-July both of its funds had lost nearly all their value. Credit traders saw the damage that summer, and stock investors kept buying anyway. On October 9, 2007, the S&P 500 closed at a record 1,565.15. By March 2009 it was at 676.53. The bull case deserves a fair hearing though... CoreWeave HAS a $104 billion backlog, its revenue more than doubled last quarter, and Nvidia has promised to buy any computing capacity it can't rent out through 2032. Anthropic says it turned an adjusted profit. Goldman calls this week's selling a rotation from smaller AI names into the giants. But the giants have a problem of their own: By Bank of America's consensus numbers, the five biggest AI spenders go from $191 billion in combined free cash flow last year to negative $63 billion this year. A rotation into companies that are about to burn cash on AI still depends on someone lending them the difference. So watch the bonds first. If CoreWeave's debt keeps sliding and more data-center borrowers have to pay double digits, the November IPOs will be selling AI to the public right at the top. If the bonds recover, I'll admit the lenders got spooked early. In 2007, the warning showed up in the bond market three months before stocks peaked - why would you ignore it a second time?

This finally exposed the AI industry's dirtiest trick. Google paid $2.7 billion for everything valuable at Character.AI, and the 163 million users and the lawsuits stayed behind in the shell that just went bankrupt. Now Disney is buying what's left for $20 million, and Google is listed as one of the creditors. This is the first collapse of a deal structure Big Tech has used all over the AI industry, and I'd be shocked if it's the last. The trick works in four moves: In August 2024, Google paid $2.7 billion for a non-exclusive license to Character.AI's models and hired back its co-founders, Noam Shazeer and Daniel De Freitas, along with more than two dozen researchers. On paper, Google NEVER bought the company. Part of that money bought out the venture investors at around a $2.5 billion valuation, up from $1 billion a year earlier. So the investors got paid, the founders went to Google, and Google walked away with the technology. What stayed behind was about 100 employees, a platform with millions of users, and a growing pile of lawsuits. The company no longer had the money to train its own models, so it ran on open-source ones instead. And because the deal was built as a license and a hiring spree instead of an acquisition, it never went through a merger review. The New York Times reported that people involved in these deals cited a desire to sidestep regulatory scrutiny. Then the bill came due: In January, Google and Character.AI agreed to settle lawsuits in four states accusing the chatbots of harming minors, including a case tied to a teenager's suicide. In May, Pennsylvania sued over a bot that presented itself as a licensed psychiatrist. Kentucky now shows up in the bankruptcy as a litigation claimant, and the company itself cites potential litigation liabilities as a reason it couldn't keep funding the business. Monday's filing in Delaware puts both its assets and its liabilities somewhere between $50 million and $100 million. Google sits on the list of top unsecured creditors, owed $4,148,944. The filing also counts about 163 million current and past users. The company says they aren't creditors and plans to notify them with a blog post, citing the cost of anything more. The filings don't say what happens to their chats in the sale. Disney's $20 million gets the intellectual property. Last month Disney also hired Character.AI's former CEO, Karandeep Anand, as its first CTO. And this setup is spreading across the industry: Microsoft paid $650 million to license Inflection's models and take its founders. Amazon did it with Adept, and four people were left working there. Google did it again with Windsurf for $2.4 billion. Meta paid $14 billion for 49% of Scale AI and took its CEO. So I see ONE business model running through all of it. Big Tech pays the investors, takes the brains, and licenses the technology. The users, the lawsuits, and the bills stay inside a shell with no founders and no money. When that shell fails, a bankruptcy court decides who gets paid, and everyone suing waits in line behind the lawyers and the vendors. The structure is the problem, and it's fixable with one rule: When a tech giant pays to license a startup's technology and hires its founders, regulators should review it as the acquisition it is, and the buyer should inherit the startup's legal liabilities. Until that rule exists, every startup Big Tech licenses this way is a company designed to leave its problems behind.

OpenAI now moves the stock market like the Fed does. And it's using AI safety as cover to make sure nobody can check its numbers. On Thursday one unaudited figure wiped $169 billion off Nvidia, and on Friday a projection about the future brought investors right back. If you look closely, you'll understand that the order of events shows exactly who holds the power in this market: On Thursday, the Financial Times reported that OpenAI told its investors its annualized revenue was approaching $50 billion. For more than a week, Wall Street had been working off a number close to $70 billion. That bigger number came from OpenAI's own investors, who calculated it by counting sales the way Anthropic does. Nvidia fell almost 3% and lost about $169 billion in market value. Oracle fell 5.5%, CoreWeave fell 7.8%, and Broadcom fell 4.4%. That same night, Bloomberg reported that OpenAI now expects to hit $70 billion by the end of the year. On Friday, investors piled back into AI stocks. Look at that second number: An annualized run rate already takes a shorter stretch of sales and multiplies it out to a full year. So Friday's rally was built on a forecast of a forecast. And to hit it, OpenAI's run rate has to jump by $20 billion in a single quarter, which is about 40% in three months. Nobody outside the company can test whether that's realistic, and the market bought it OVERNIGHT. Now ask why the number came out when it did: OpenAI is in talks to raise $30 billion at a $1.4 trillion valuation, and reports say it set that price itself, with no lead investor negotiating it. Up to $10 billion could come from funds in Abu Dhabi, including MGX, with BlackRock also at the table. Bloomberg said OpenAI shared its revenue numbers with investors as part of those fundraising talks. And this is where I think the safety story falls apart. OpenAI pushed its IPO to next year at the earliest and pointed to its focus on AI safety. Staying private means no audited quarterly reports and no public filings. I'd bet the big investors get to see the real books. Everyone else just gets the leaks. And everyone else is exposed whether they like it or not: Oracle has $664 billion in future contracts on its books and has never said how much of that is OpenAI. CoreWeave is sitting on a $104 billion backlog funded largely with debt, and it paid $640 million in interest in a single quarter. Broadcom's own management said OpenAI's financing is less clear than that of its other big AI customer. OpenAI has also committed to roughly 12 gigawatts of Nvidia systems. If you own an S&P 500 index fund, you own Nvidia, Oracle, and Broadcom. That's what I mean when I say OpenAI moves markets like the Fed. When the Fed speaks, the whole market reprices, and the Fed publishes its minutes, testifies to Congress, and gets audited. OpenAI's numbers reach you through investors and people familiar with the matter, in the middle of a fundraise, at a price it picked. OpenAI's defenders have a point though... It never published the $70 billion itself, a private company owes the public nothing, and its revenue is still growing at a pace most companies never see. But once your private numbers can erase $169 billion from a public company in a single day, you're playing a public role. Every public company with major OpenAI exposure should have to disclose exactly how much of its backlog depends on OpenAI, starting with Oracle. And if OpenAI wants the trust that comes with a $1.4 trillion price, it should publish audited numbers now instead of waiting for an IPO it already pushed back. Until that happens, I'm treating every AI stock that leans on OpenAI as a bet on a number I'm not allowed to see.

The proof that the AI bubble will "burst soon": The world's biggest pension funds are selling the AI trade. The list includes Australia's $260 billion Australian Retirement Trust, Canada's $388 billion La Caisse, and the UK's People's Pension, which cut its US share from 53% to 49%. A survey of 430 institutions managing $5 trillion found a third of them plan to cut US exposure over the next year, twice as many as last year. Their reason was the same everywhere: More than a third of the S&P 500 is now a bet on the AI build-out. The Nasdaq closed at a record the same day. So when the most patient money on Earth sells, who's buying? You are, and you're doing it on autopilot. Here's how the machine works: A huge share of retirement savings now sits in index funds, and an index fund buys by size. The bigger a stock gets, the more of it your fund owns. Even a fund labeled global puts about 64% of your money in US stocks, because that's how big they've gotten. It can't decide a stock looks expensive. It can't decide a third of its money in one trade is too much. So it keeps buying whatever got bigger, every paycheck, forever. That means two kinds of retirement money now sit on opposite sides of the same trade: The first kind has a professional in charge, someone paid to study valuations and step back when the risk looks wrong. That money is pulling away from AI. The second kind is yours. Nobody is deciding anything for it. It runs on a default setting, and the default setting says buy more of whatever already went up. So the pensions get to sell to a buyer that can't say no. Every bubble needs a greater fool, and this one built the fool straight into us. And the timing makes it worse... Anthropic is reportedly lining up a mid-November listing at around $2 trillion, raising as much as $100 billion, which would be the biggest stock sale in history. The most careful buyers on Earth are stepping back right before the largest supply of AI stock ever hits the market. Someone HAS to absorb it. The pensions say they're simply rebalancing and still believe in AI, and maybe the boom keeps running. But notice WHO gets to rebalance. A professional can trim when prices look stretched. Your fund doesn't have that button. I think this is the most overlooked setup in the market right now. The greater fool used to be a person. Now it's the default setting on retirement accounts...

The whole doomsday act is a marketing stunt. The headline everywhere was that OpenAI killed a new model because it was too dangerous to release. And the world read it exactly how it was meant to be read: OpenAI is so powerful it has to protect you from its own creation. But WHAT about this model scared Altman? He said not to "overrotate on this one thing." The model was just "a little bit worse on a few of the evals." He called it an "abundance of caution." "There's not a big scary thing in this case." So the terrifying AI they heroically cancelled was a slightly underperforming model they'll patch and ship later, the most routine thing in software - but they dressed it up as a monster. And he let it run. He watched "too dangerous to release" travel the entire planet, knowing it was a bug fix, and corrected the record only when a reporter put him on the spot. So I'll tell you why a company wants a boring quality issue reported as "we stopped a dangerous AI": The danger is the product. Nothing sells a trillion-dollar valuation like a company so powerful it has to save you from itself. A model that flunked a benchmark can't do that. But a monster can. The doom is the product, and we‘re the one being sold.